Analyst Reactions Several equity analysts on the Street revised their recommendations for rental property owner Tricon Residential Inc.(TCN-N, TCN-T) following Friday’s announcement of a US$3.5-billion friendly takeover offer from New York-based Blackstone Inc. (BX-N).
In a research note released before the bell titled Parting is Such Sweet Sorrow, Citi analyst Eric Wolfe moved Tricon to “neutral” from “buy” with a US$11.25 target to match proposed deal price, up from US$10.50. The current average is US$10.41.
“We view Blackstone’s announced privatization of TCN at $11.25 (approximately 30-per-cent premium to Thursday’s close) as a fair outcome for shareholders, especially given continued volatility in the capital markets and elevated interest rates,” said Mr. Wolfe. ”Due to TCN’s higher leverage vs. public REITs, the NAV is sensitive to the assumed cap rate (we calculate 5.2 per cent at deal price vs. management’s estimate of5.5 per cent before adjusting for the portfolio’s loss-to-lease). It’s possible that another investor could place a higher value on the portfolio, and the break fee is relatively small in the near-term (approximately 20 cents), but we believe a topping bid is unlikely given TCN’s complexity and size (approximately 6.4 billion GAV). We downgrade shares to Neutral.”
Others making adjustments include:
* Raymond James’ Brad Sturges to “market perform” from “strong buy” with a US$11.25 target, up from US$11.
“We view Blackstone’s takeover offer for Tricon’s core SFR home platform to be reasonably fair in the context of the volatile interest rate environment. Further, given Blackstone’s right to match, we assign a low probability that a superior offer could be received by Tricon above the $11.25/share offer price,” said Mr. Sturges.
* CIBC’s Dean Wilkinson to “tender” from “outperformer” with a US$11.25 target , rising from US$10.
* TD Securities’ Jonathan Kelcher to “tender” from “buy” with a US$11.25 target, up from US$10.50.
Elsewhere, KBW’s Jade Rahmani raised his target to US$11.25 from US$9.50 with a “hold” rating.