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Cadillac Fairview For Sale

August 6, 1986

TORONTO (AP) _ Canada’s most profitable real estate developer, Cadillac Fairview Corp., and a key holding of Charles and Edgar Bronfman of Montreal, is for sale.

Cadillac Fairview announced Wednesday it had retained two investment banking firms to solicit offers for all its outstanding common shares.

The company’s board of directors made the decision based on management’s opinion that the value of the common shares ″substantially exceeds their current market price,″ president Bernard Ghert said.

Cadillac Fairview said that the Bronfman family will sell their 50 percent interest in the company ″if a satisfactory price is obtained.″

Based on a preliminary review, the two investment firms - Goldman Sachs of New York and McLeod Young Weir of Toronto - agree with management’s assessment that the shares are undervalued, Ghert said.

But news of the possible sale quickly reversed the fortunes of the company’s stock. Shares closed in trading on the Toronto Stock Exchange on Wednesday at $31.25 (Canadian), up from $22.37 1/2 a share before trading in the shares was halted pending the announcement.

At Cadillac Fairview’s annual meeting a month ago, Ghert told shareholders the replacement value of the company’s assets was about $5.2 billion while the same assets were carried on the company’s books at $1.9 billion.

Based on that estimate, he put the per-share replacement asset value at about $49, more than double what the shares had been trading for.

Olympia and York Holdings Corp., a holding company with significant real estate interests owned by the Reichmann family, owns about 20 percent of Cadillac Fairview. Olympia and York spokesmen could not be reached for comment on whether the holding company would be willing to sell its shares.

Ira Katzin, a real estate analyst with Bache Securities, estimates the replacement asset value of the company at about $46.50 a share when all the warrants are exercised but he doubts any purchaser will pay that much. At that price it would cost about $3.4 billion to buy all the common shares.

Katzin guesses the bidding may reach $35 a share.

Ghert said in an interview that the contention that Cadillac Fairview’s shares have been undervalued compared to the rest of the market is ″nothing new. Several analysts have been saying that for some time now.″

He would not comment on what might be considered ″a satisfactory price″ nor on whether any interested bidders were waiting in the wings.

But he said he expects there will be broad interest in the company both in Canada and the United States, where 60 percent of its assets are held.

Cadillac Fairview owns numerous shopping centers and commercial properties in the North America, and is the 27th largest company by assets in Canada.

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