KEYreit Board Forms Independent Committee and Adopts Unitholder Rights Plan

KEYreit (KRE.UN) announced that the board of trustees has formed a special committee consisting of independent trustees John Jakolev, chairman of the special committee, and Donald Biback and George Schott to consider and evaluate the unsolicited partial take-over bid launched on January 31, 2013 by Huntingdon Capital Corp. (Huntingdon) to purchase up to approximately 45% of the trust units of KEYreit for cash consideration of $7.00 per unit (the "Huntingdon Partial Bid"). The special committee has retained BMO Capital Markets as its financial advisors, Norton Rose Canada LLP as its legal counsel and Kingsdale Shareholder Services Inc. as its unitholder services advisor to assist in these matters.
The preliminary view of the special committee is that the Huntingdon Partial Bid is wholly inadequate, coercive, highly opportunistic and fails to adequately compensate unitholders for the underlying value of KEYreit's assets and growth opportunities. The Huntingdon Partial Bid seeks to gain effective control of KEYreit for an inadequate offer price which represents only a 13% premium to the closing price per unit of $6.18 on the TSX on January 28, 2013 (the day before the public announcement of Huntingdon's intent to launch the Huntingdon Partial Bid). Furthermore, the Huntingdon Partial Bid contains numerous conditions providing Huntingdon significant discretion as to whether or not to acquire units tendered to the Huntingdon Partial Bid.
Unitholders should also understand that they may not be able to sell all of the units that they tender to the Huntingdon Partial Bid. If more than 6,628,940 units are deposited, the units to be purchased under the Huntingdon Partial Bid will be taken up and paid for on a pro-rata basis according to the number of units deposited by each unitholder. Since Huntingdon offered to purchase only up to 6,628,940 units and already owns 814,000 units, 7,442,939 units will not be purchased by Huntingdon. If the Huntingdon Partial Bid is successful and Huntingdon purchases all 6,628,940 units, Huntingdon will hold a controlling ownership interest of over 50% while the resulting public float of units will be diminished to less than 33% of KEYreit's total units issued and outstanding, thereby potentially having an adverse effect on the liquidity and future value of units.
Unitholders are strongly urged to TAKE NO ACTION with respect to the Huntingdon Partial Bid until the special committee has completed its review process, at which time the board will communicate its recommendation to unitholders by way of press release.
Unitholders who have any questions should contact Kingsdale Shareholder Services Inc. at 1-888-518-1562 toll-free in North America, 1-416-867-2272 outside of North America (collect calls accepted) or by email at
The board of trustees also announced that it has approved the adoption of a unitholder rights plan, effective immediately. The rights plan is intended to ensure that, in the context of the Huntingdon Partial Bid, the board and unitholders have sufficient time to appropriately evaluate the Huntingdon Partial Bid and, if determined appropriate, identify, develop and negotiate alternatives to maximizing unitholder value.  The rights plan also seeks to ensure the fair treatment of all unitholders in connection with any take-over bid and to protect unitholders from the ability of any person to obtain effective control of KEYreit through coercive means.
In accordance with the rights plan, the board has authorized the issuance of one right per unit outstanding at the record time of 5:01 p.m. on February 8, 2013, and the issuance of one right for each additional unit issued after the record time. The rights will become exercisable if a person, together with its associates and affiliates and any others acting jointly or in concert with such person, acquires beneficial ownership of units which (when aggregated with its current holdings of units) total 15% or more of the outstanding units, or if a person announces its intent to commence a take-over bid for units that is not a "permitted bid" (in each case, a "flip-in event").  A permitted bid is a take-over bid that is made to all unitholders, is made for all of the issued and outstanding units, remains open for acceptance for at least 60 days, and is accepted by at least 50% of the units held by independent unitholders.  The Huntingdon Partial Bid is not a permitted bid under the rights plan.
Upon the occurrence of a flip-in event, each right would entitle the holder thereof (other than the person triggering the flip-in event and its affiliates, associates and joint actors), upon exercise, to purchase additional units at a significant discount to the market price of the units at such time. The board, acting in good faith, may waive the application of the rights plan or defer the time when the rights become exercisable.
The board has determined to defer the "separation time" for rights under the rights plan in connection with the Huntingdon Partial Bid to a later date to be determined by the board.

on February 11, 2013