JMB Realty to Acquire Cadillac Fairview : $2-Billion Deal Would Be North America’s Largest Real Estate Merger

Cadillac Fairview, one of Canada’s biggest real estate companies, will be acquired by JMB Realty, a Chicago-headquartered development giant, for about $2 billion ($2.7-billion Canadian), the two companies announced Friday.

The transaction will be the largest real estate merger in North American history, analysts said. If financing can be arranged and necessary approvals obtained, the deal is expected to be completed Aug. 31.

Bernard I. Ghert, president and chief executive of Cadillac Fairview, said the company’s board of directors accepted JMB’s offer of $26.25 ($35 Canadian) a share, because it believes that the deal is in the best interest of all common shareholders.

JMB will pay in cash and in prior-preferred stock in JMB. The cash portion, according to the agreement, may not exceed 65% of the total and the prior-preferred stock portion may not exceed 50%. However, under certain limited circumstances, Cadillac Fairview may require the entire amount to be paid in cash.

“We are pleased to have the opportunity to acquire this premier real estate development company,” Neil Bluhm, president of JMB, said.

Cadillac Fairview has interests in more than 56 million square feet of industrial properties, office buildings and shopping centers in North America, with most of its new and planned projects located in the United States.

The company owns more than 8 million square feet of office, business and industrial space in California, including a 22-story office building at 6500 Wilshire Blvd. in Los Angeles and an 80% interest in the World Savings headquarters building in Oakland. In addition, the Canadian company is a large minority partner in California Plaza, a $1.2-billion office, hotel and residential complex now being built on Bunker Hill in downtown Los Angeles.

Firm’s Far-Reaching Empire

It also built the Eaton Centre in Toronto and First City Center in Dallas, is completing the IMB Tower in Atlanta and has office buildings, business parks and shopping malls in Calgary, Montreal, Vancouver, New Orleans and other places.

JMB, a closely held concern, is one of the largest real estate developers in the world. It has financed much of its development through limited partnership offerings.

It owns an important share of Los Angeles’ Century City, including an interest in the Century Plaza Towers, as well as office buildings in downtown Los Angeles. It is also buying Walt Disney Co.’s Arvida development subsidiary for about $400 million in a deal expected to close May 30.

Cadillac Fairview had been looking for a buyer since August, when the wealthy Bronfman family of Montreal, which owns 51% of the company, made it clear that it wanted to sell its stake. A further 26% of Cadillac Fairview is held by the Reichmann family of Toronto, which also owns Olympia & York Developments, North America’s biggest real estate concern.

Industry sources said Cadillac Fairview had received other takeover offers, including one from Houston developer Gerald Hine, who offered a slightly lower price.

The acquisition price is almost double the $1.1-billion financing in 1985 of Rockefeller Center in New York, believed to be the largest real estate transaction to date. Trading in Cadillac Fairview’s stock was halted Thursday on the Toronto Exchange. The price was $26.02 ($34.75 Canadian), up 28 cents (37.5 cents Canadian).