Melcor Developments, Melcor REIT amend, restate arrangement agreement

Melcor Real Estate Investment Trust and Melcor Developments (MODVF) announce that they have entered into an Amended and Restated Arrangement Agreement with Melcor REIT GP, which provides for, among other things, consideration of $5.50 per unit, which is $0.55 per Unit or an 11% increase over the prior consideration. Furthermore, the Amended Agreement has a new and extended 90-day “go shop” period. Given the REIT’s execution of the Amended Agreement, the REIT also announces today that it is cancelling the special meeting of REIT unitholders scheduled for November 26, 2024. This will allow the REIT to immediately commence work on the extended 90-day “go shop” process pursuant to the terms of the Amended Agreement, which will expire at 11:59 MT on February 24, 2025. The Purchaser will not have the right to match any superior proposal. Execution of the Amended Agreement was unanimously approved by the REIT’s Board of Trustees, acting on the unanimous recommendation of the previously announced independent committee of the REIT’s Board of Trustees. BMO Capital Markets, financial advisor to the REIT, and Ventum Financial Corp, independent financial advisor and independent valuator to the Independent Committee, have each rendered fairness opinions to the effect that, as at November 24, 2024, the Improved Consideration to be received by the REIT’s unitholders pursuant to the Amended Agreement is fair, from a financial point of view. In addition, Ventum Capital Markets will deliver an updated independent formal valuation. It is anticipated that a new special meeting of the holders of Units and special voting units will be called to approve the New Arrangement following expiry of the “go shop” period, with such New Meeting having a new record date for entitlement to vote. The REIT intends to apply to the Court of King’s Bench of Alberta for an amended Interim Order providing for the updated transaction terms and timeline. The REIT will provide further disclosure to its unitholders, including with respect to the date of the New Meeting, once available. Unitholders are not required to take any action at this time. The transaction pursuant to the Amended Agreement is structured as a statutory plan of arrangement under the Business Corporations Act. Completion of the New Arrangement, which is expected to occur in the second quarter of 2025 is subject to customary closing conditions, including Voting Unitholder and Court approval. The New Arrangement provides for a distribution by the REIT to holders of Units of record immediately prior to closing in an amount equal to the REIT’s estimate of its taxable income, including taxable income to be allocated from the Melcor REIT Limited Partnership to the REIT, in its current taxation year. Such distribution will be payable by the issuance of additional Units which will immediately be consolidated. Pursuant to the Amended Agreement, the REIT will have a 90-day “go-shop” period that will extend from November 25, 2024 to February 24, 2025, during which it is permitted to solicit third-party interest in submitting a proposal which is superior to the proposal made by the Purchaser. The Purchaser will not have the right to match a superior proposal and has agreed to sell its interest in the REIT under any superior proposal that is accepted by the Independent Committee, subject to certain terms as set out in the Amended Agreement, including the termination of and release under all agreements between the Purchaser and the REIT. The Amended Agreement also includes customary provisions, including non-solicitation by the REIT of alternative transactions following the conclusion of the Go-Shop Period, and a $5.8 million termination fee payable to the Purchaser under certain customary circumstances, including in the event the REIT is successful in soliciting a superior proposal. In addition, the Purchaser has agreed to forego all termination and change of control payments it would otherwise be entitled to under the property management and asset management agreements in the event of a superior proposal; and reimburse the REIT for the reasonable costs and expenses incurred by it in connection with the New Arrangement, subject to certain exceptions. There can be no assurance that the go-shop process will result in a superior proposal. Completion of the New Arrangement will be subject to various closing conditions, including the approval of at least two-thirds of the votes cast by Voting Unitholders present in person or represented by proxy at the New Meeting and the majority of the holders of Units present in person or represented by proxy at the New Meeting, excluding the votes of the Purchaser and any other Voting Unitholders whose votes are required to be excluded for the purposes of “minority approval” under Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions.