Blackstone Real Estate to Take Tricon Residential Private
- The transaction price represents a premium of 30% to Tricon’s closing share price on the NYSE on January 18, 2024, and a 42% premium to the volume weighted average share price on the NYSE over the previous 90 days.
- The acquisition aims to propel Tricon’s efforts to add housing supply across the U.S. and in Toronto, Canada.
- None.
Insights
The acquisition of Tricon Residential Inc. by Blackstone represents a significant consolidation within the real estate investment sector. The Transaction price of $11.25 per Common Share, a 30% premium over the closing share price, indicates an aggressive move by Blackstone to expand its portfolio in quality rental housing. This move is likely to be closely scrutinized by investors for the potential impact on Blackstone's liquidity and leverage ratios, as the $3.5 billion equity transaction value is substantial.
From a financial perspective, the maintenance of BREIT's approximately 11% ownership stake post-closing suggests a strategic interest in Tricon's operations rather than a pure financial investment. The significant capital commitment of $1 billion for U.S. single-family homes and $2.5 billion for Canadian apartments indicates Blackstone's confidence in the rental housing market's growth trajectory, particularly in high-growth markets such as Atlanta and Toronto. Investors should consider the implications for Blackstone's diversification strategy and the potential for enhanced revenue streams through increased rental income.
The real estate market, especially the rental sector, is experiencing a transformation, with a growing demand for single-family rental homes and multifamily apartments. Tricon's development pipeline, which includes 2,500 houses under development and 5,500 market-rate and affordable multifamily rental apartments, positions it as a key player in this segment. Blackstone's investment is likely to accelerate the delivery of these projects, addressing housing shortages in strategic urban centers.
For stakeholders, the focus on tech-enabled operating platforms and on-the-ground teams could enhance operational efficiencies and resident satisfaction, potentially leading to higher retention rates and a strong brand reputation. The long-term implications for the housing market include increased supply and potentially stabilized rental prices due to the injection of new, quality units.
From a legal standpoint, the transaction's structure as a statutory plan of arrangement under the Business Corporations Act (Ontario) requires careful consideration. The requirement for a two-thirds majority approval from Tricon shareholders, excluding Blackstone and its affiliates, underscores the importance of minority shareholder interests in such transactions. The termination fee provisions and the 'right to match' clause are standard in such agreements, providing a balance between securing the deal and allowing room for a superior proposal.
The regulatory approvals under the Canadian Competition Act and Investment Canada Act will be critical hurdles, as they ensure the transaction aligns with national economic interests. Investors should note that the successful navigation of these regulatory landscapes can influence the timeline and finalization of the deal.
Blackstone Remains Committed to Tricon’s Extensive Housing Development Platform, Including its Pipeline of
Plans to Improve Quality of Existing
All financial and share price-related information is presented in
Tricon provides quality rental homes and apartments in great neighborhoods, along with exceptional resident services through its tech-enabled operating platform and dedicated on-the-ground operating teams. Tricon serves communities in high-growth markets such as
Under Blackstone’s ownership, the Company plans to complete its
“We are proud of the significant and immediate value that this transaction will deliver to our shareholders, while allowing us to continue providing an exceptional rental experience for our residents. Blackstone shares our values and our unwavering commitment to resident satisfaction, and we look forward to benefitting from their expertise and capital as we partner in building thriving communities,” said Gary Berman, President & CEO of Tricon.
“Tricon provides access to high-quality housing, and we are fully committed to delivering an exceptional resident experience together,” said Nadeem Meghji, Global Co-Head of Blackstone Real Estate. “We are excited that our capital will propel Tricon’s efforts to add much needed housing supply across the
The announcement of the Transaction follows the unanimous recommendation of a committee (the “Special Committee”) of independent members of Tricon’s board of directors (the “Board”). The Board, after receiving the unanimous recommendation of the Special Committee and in consultation with its financial and legal advisors, has determined that the Transaction is in the best interests of Tricon and fair to Tricon shareholders (other than Blackstone and its affiliates) and recommends that Tricon shareholders vote in favor of the Transaction.
“Following a thoughtful and comprehensive process, the Special Committee and Board concluded that the transaction with Blackstone is in the best interests of Tricon and its shareholders, and that the transaction price represents compelling and certain value for Tricon’s shares,” said Peter Sacks, Chair of the Special Committee and Independent Lead Director of Tricon.
Transaction Details
The Transaction is structured as a statutory plan of arrangement under the Business Corporations Act (
As part of the Transaction, Tricon has agreed that its regular quarterly dividend during the pendency of the Transaction will not be declared and the Company’s dividend reinvestment plan will be suspended. If the Arrangement Agreement is terminated, Tricon intends to resume declaring and paying regular quarterly distributions and reinstate the dividend reinvestment plan.
The Arrangement Agreement provides for, among other things, customary representations, warranties and covenants, including customary non-solicitation covenants from Tricon, subject to the ability of the Board to accept a superior proposal in certain circumstances, with a "right to match" in favour of Blackstone, and conditioned upon payment of a
Completion of the Transaction will be subject to various closing conditions, including the approval of at least (i) two-thirds (66 2/
Copies of the Arrangement Agreement and of the management information circular for the Special Meeting will be filed with Canadian securities regulators and will be available on the SEDAR+ profile of Tricon at www.sedarplus.ca. In addition, Tricon will furnish to the
In connection with the Transaction, Tricon will prepare and mail a Schedule 13E-3 Transaction Statement (the “Schedule 13E-3”). The Schedule 13E-3 will be filed with the SEC. INVESTORS AND SHAREHOLDERS ARE URGED TO READ CAREFULLY AND IN THEIR ENTIRETY THE SCHEDULE 13E-3 AND OTHER MATERIALS FILED WITH THE SEC WHEN THEY BECOME AVAILABLE, AS THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT TRICON, THE TRANSACTION AND RELATED MATTERS. In addition to receiving the Schedule 13E-3 by mail, shareholders will also be able to obtain these documents, as well as other filings containing information about Tricon, the Transaction and related matters, without charge from the SEC’s website (http://www.sec.gov).
BREIT, which made an initial
Subject to and upon completion of the Transaction, the Common Shares will no longer be listed on the NYSE or TSX. Tricon will remain headquartered in
Formal Valuation and Fairness Opinions
In connection with its review of the Transaction, the Special Committee retained Scotia Capital Inc. (“Scotiabank”) as independent valuator and financial advisor to provide financial advice and prepare a formal valuation of the Common Shares (the “Formal Valuation”) as required under MI 61-101. Scotiabank concluded that, as of January 18, 2024, and subject to certain assumptions, limitations and qualifications, the fair market value of the Common Shares was in the range of
Advisors
Morgan Stanley & Co. LLC and RBC Capital Markets, LLC are acting as financial advisors to Tricon. Scotiabank is acting as independent financial advisor and independent valuator to the Special Committee.
Goodmans LLP and Paul, Weiss, Rifkind, Wharton & Garrison LLP are acting as legal counsel to Tricon in connection with the Transaction and
BofA Securities, Deutsche Bank Securities Inc., J.P. Morgan Securities LLC and Wells Fargo are acting as Blackstone’s financial advisors and Simpson Thacher & Bartlett LLP and Davies Ward Phillips & Vineberg LLP are acting as legal counsel.
About Tricon Residential Inc.
Tricon Residential Inc. (NYSE: TCN, TSX: TCN) is an owner, operator and developer of a growing portfolio of approximately 38,000 single-family rental homes in the
About Blackstone
Blackstone is the world’s largest alternative asset manager. We seek to create positive economic impact and long-term value for our investors. We do this by relying on extraordinary people and flexible capital to help strengthen the companies we invest in. Our over
Additional Early Warning Disclosure
BREIT currently indirectly owns 6,815,242 Common Shares and 240,000 preferred units of Tricon PIPE LLC that are exchangeable into 28,235,294 Common Shares, representing approximately
Forward-Looking Information
Certain statements contained in this news release may constitute forward-looking information within the meaning of applicable Canadian securities laws. Forward-looking information is often, but not always, identified by the use of words such as "anticipate", "plan", "expect", "may", "will", "intend", "should", and similar expressions. This information involves known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information. Forward-looking information in this news release includes, but is not limited to, the following: statements with respect to the expected completion of the Transaction and the timing thereof, the anticipated benefits to the shareholders of Tricon, satisfaction of the conditions to closing the Transaction, the holding of the Special Meeting, the suspension and resumption of quarterly distributions and the Company’s dividend reinvestment plan, and delisting of the Common Shares and ceasing to be a reporting issuer following closing of the Transaction.
Such forward-looking information and statements involve risks and uncertainties and are based on management’s current expectations, intentions and assumptions, including expectations and assumptions concerning receipt of required approvals and the satisfaction of other conditions to the completion of the Transaction, and that the Arrangement Agreement will not be amended or terminated. There can be no assurance that the proposed Transaction will be completed, or that it will be completed on the terms and conditions contemplated in the Arrangement Agreement.
Accordingly, although the Company believes that the expectations and assumptions on which the forward-looking information contained in this news release is based are reasonable, undue reliance should not be placed on the forward-looking information because Tricon can give no assurance that it will prove to be correct. Since forward-looking information addresses future events and conditions, by its very nature it involves inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to: the failure to obtain necessary approvals or satisfy (or obtain a waiver of) the conditions to closing the Transaction as contained in the Arrangement Agreement; the occurrence of any event, change or other circumstance that could give rise to the termination of the Arrangement Agreement; material adverse changes in the business or affairs of Tricon; Tricon’s ability to obtain the necessary Tricon shareholder approval (including the “minority approval”); the parties’ ability to obtain requisite regulatory approvals; either party’s failure to consummate the Transaction when required or on the terms as originally negotiated; risks related to the disruption of management time from ongoing business operations due to the Transaction and possible difficulties in maintaining customer, supplier, key personnel and other strategic relationships; potential litigation relating to the Transaction, including the effects of any outcomes related thereto; the possibility of unexpected costs and liabilities related to the Transaction; competitive factors in the industries in which Tricon operates; interest rates, currency exchange rates, prevailing economic conditions; and other factors, many of which are beyond the control of Tricon. Additional factors and risks which may affect Tricon, its business and the achievement of the forward-looking statements contained herein are described in Tricon’s annual information form and Tricon’s management’s and discussion and analysis for the year ended December 31, 2022 and in the other subsequent reports filed on the SEDAR+ profile of Tricon at www.sedarplus.ca and Tricon’s filings with the SEC as well as the Schedule 13E-3 and management information circular to be filed by Tricon.
The forward-looking information contained in this news release represents Tricon’s expectations as of the date hereof, and is subject to change after such date. Tricon disclaims any intention or obligation to update or revise any forward-looking information whether as a result of new information, future events or otherwise, except as required under applicable securities laws.
This press release also includes forward-looking statements within the meaning of the federal securities laws and the Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by the use of forward -looking terminology such as “outlook,” “indicator,” “believes,” “expects,” “potential,” “continues,” “identified,” “may,” “will,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates”, “confident,” “conviction” or other similar words or the negatives thereof. These may include financial estimates and their underlying assumptions, statements about plans, objectives, intentions, and expectations with respect to positioning, including the impact of macroeconomic trends and market forces, future operations, repurchases, acquisitions, future performance and statements regarding identified but not yet closed acquisitions. Such forward-looking statements are inherently uncertain and there are or may be important factors that could cause actual outcomes or results to differ materially from those indicated in such statements. Some of the factors that could cause actual results to differ materially are, among others, the timing and ability to consummate the pending transaction; the occurrence of any event, change or other circumstance that could delay the closing of the transaction, or result in the termination of the agreement for the transaction; and adverse effects on BREIT's common stock because of a failure to complete the transaction. Other factors include but are not limited to those described under the section entitled “Risk Factors” in BREIT's prospectus and annual report for the most recent fiscal year, and any such updated factors included in BREIT's periodic filings with the SEC, which are accessible on the SEC's website at www.sec.gov. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included herein (or in BREIT's public filings). Except as otherwise required by federal securities laws, BREIT undertakes no obligation to publicly update or revise any forward -looking statements, whether as a result of new information, future developments or otherwise.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240119101417/en/
For further information, please contact:
Wissam Francis
EVP & Chief Financial Officer
Email: IR@triconresidential.com
Wojtek Nowak
Managing Director, Capital Markets
Tricon Media:
Tara Tucker
Senior Vice President, Corporate and Public Affairs
Email: mediarelations@triconresidential.com
Blackstone Media:
Jillian Kary
212-583-5379
Jillian.Kary@Blackstone.com
Source: Tricon Residential Inc.
FAQ
What is the transaction price for Blackstone to acquire all outstanding common shares of Tricon?
What is the premium percentage of the transaction price to Tricon’s closing share price on the NYSE on January 18, 2024?
What is the premium percentage of the transaction price to the volume weighted average share price on the NYSE over the previous 90 days?
What is the equity transaction value based on fully-diluted shares outstanding?
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