Cadillac Fairview Will Seek Offers for Its Stock : Share Price of Canadian Real Estate Developer Soars on News of Possible Sale

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

Cadillac Fairview reported Wednesday that it has retained two investment banking firms to solicit offers for all of its outstanding common shares.

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

The company is a major partner in the $1.2-billion California Plaza, which is part of the Bunker Hill redevelopment project in downtown Los Angeles, and is also responsible for a number of buildings in Beverly Hills and for Gateway Center in Torrance.

Cadillac Fairview’s board of directors decided to sell the company 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 the Bronfman family will sell its 50% 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 Wednesday in trading on the Toronto Stock Exchange 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 that 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 & York Holdings Corp., a holding company with significant real estate interests owned by the Reichmann family, owns about 20% of Cadillac Fairview.

Olympia & 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 Prudential-Bache Securities, estimated the replacement asset value of the company at about $46.50 a share when all of the warrants are exercised, but he doubted that any purchaser will pay that much.

At that price, it would cost about $3.4 billion to buy all of the common shares.

Katzin guessed that 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 to be broad interest in the company both in Canada and the United States, where 60% of its assets are held.