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SmartREIT, Strathallen to acquire OneREIT in C$1.1B deal

OneREIT agreed to be acquired by Smart Real Estate Investment Trust and Strathallen Acquisitions Inc. in a deal valued at C$1.1 billion, or C$4.26 per unit on a fully prorated basis.

The consideration comprises approximately C$305 million in cash and C$75 million of SmartREIT units. The amount values OneREIT units at a 14.5% premium over OneREIT's Aug. 3 closing price and a 22.4% premium over the unaffected unit price on June 7, 2016, the day before OneREIT announced that it would conduct a strategic review, the company said.

OneREIT unit holders may elect to receive C$4.275 per unit in cash or units of SmartREIT representing C$4.20 of value per OneREIT unit. Holders of OneREIT special voting units and the related underlying Class B limited-partnership units exchangeable for OneREIT units will be entitled to elect to receive C$4.275 per unit in cash or retain their LP units, which will become exchangeable for SmartREIT units at the same rate as OneREIT units.

Strathallen, a subsidiary of Strathallen Capital Corp., agreed to purchase from OneREIT and its subsidiary, ONR LP, a 44-asset portfolio for C$703.5 million in cash, subject to working capital and other adjustments. The proceeds from the sale, along with cash on hand, will be used to satisfy the redemption price of the OneREIT units being redeemed for cash, as well as settle certain OneREIT transaction costs.

SmartREIT agreed to a court-sanctioned plan whereby SmartREIT will buy the remaining OneREIT assets through the issuance of SmartREIT units. SmartREIT will also be assuming all of OneREIT's remaining liabilities and obligations, including long-term debt and all residual liabilities.

The deal is conditional upon, among other things, the approval of OneREIT unitholders, as well as other regulatory and requisite approvals.

OneREIT's board of trustees, based on the recommendation of a special committee established to conduct the strategic review, has recommended OneREIT unit holders and special-voting unit holders vote in favor of the deal.

SmartREIT and Strathallen will be eligible for a termination fee of C$6.8 million if OneREIT accepts an unsolicited superior proposal from a third party. SmartREIT and Strathallen may be reimbursed for up to C$1.5 million if OneREIT unit holders fail to approve the deal. If OneREIT terminates the deal due to its own default, Strathallen is entitled to up to C$5.0 million in monetary damages.

TD Securities Inc. is serving as financial adviser to OneREIT, while National Bank Financial Inc. is the financial adviser to the OneREIT special committee. Fasken Martineau DuMoulin LLP and Goodmans LLP are acting as legal advisers to OneREIT and the special committee.

CIBC World Markets Inc. acted as financial adviser to SmartREIT, and Osler Hoskin & Harcourt LLP and Davies Ward Phillips & Vineberg LLP are acting as its legal advisers.

Stikeman Elliott LLP is acting as legal adviser to Strathallen.