TSX:FCR.UN - Post by User
Post by
retiredcfon Apr 04, 2023 10:29am
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Post# 35378433
RBC 2
RBC 2March 6, 2023
First Capital REIT
Agreement reached with Sandpiper/Artis; time to refocus and drive on
TSX: FCR.UN | CAD 17.39 | Outperform | Price Target CAD 21.00
Sentiment: Positive
Our view: From our lens, we’re pleased to see a settlement reached, ending what became a lengthy and costly distraction for FCR’s management and board. The settlement marks an abrupt turn by Sandpiper Group (SG)/Artis REIT (AX), following FCR’s filing of its circular last week. The circular laid out the strengths of its strategic plan and trustee nominees, against a number of issues with SG/AX, its nominees, and its proposed plan. As well, our conversations with investors over the past several months indicated strong support for FCR’s strategic direction. Notably, SG/AX did not receive any board seats as part of the settlement. At this stage, it’s unclear whether SG/AX will look to monetize its holdings of FCR (19.1MM units, 9% equity stake). Regardless, removing the distraction from the proxy contest allows management and the board to shift its attention back to advancing the portfolio optimization plan, a key piece of the equation to narrow the substantial gap to its intrinsic value (19% NAV discount/6.1% implied cap rate). Bottom line, time to refocus and drive on.
Details: FCR announced that it reached a settlement agreement with activists, SG/AX, pursuant to which SG/AX will withdraw its meeting requisition and trustee nominees. The agreement contains customary standstill and other provisions. Notably, FCR will reimburse SG/AX up to $1.9MM ($0.01/unit) for costs incurred (we expect some one-time costs in FCR’s Q1/23 results) and SG/ AX is not required to attend or vote its units at the 2023 AGM. The annual and special meeting that was to be held on Mar-28 will be rescheduled.