TORONTO (Reuters) – Borealis Infrastructure Management Inc said on Tuesday it will cut its takeover offer for Teranet Income Fund (TF_u.TO) by nearly 7 percent as market conditions have deteriorated and the cost of capital has risen.
Borealis, an investment arm of the Ontario Municipal Employees Retirement System pension fund, said it will now offer C$10.25 a unit, down from the C$11.00 a unit it bid on Sept. 4.
That brings the value of the offer down to C$1.5 billion from C$1.7 billion, excluding debt, based on the latest shares outstanding according to Reuters data.
Units of Teranet were down 8.7 percent at C$9.60 at midmorning on the Toronto Stock Exchange, below Borealis’s revised offer price.
Teranet holds a monopoly on the electronic land registry in the Canadian province of Ontario. It recently withdrew its opposition to Borealis’ C$11-a-unit hostile bid and left it up to unitholders to make their own decision on the deal.
Teranet was not immediately available for comment on the new offer price.
It initially rejected the bid as “inadequate”, and said Borealis had talked about offering C$12 a unit.
Teranet had held out for a white knight offer just as global equity markets were in a freefall, but no new bidders emerged as Teranet conducted an auction process.
Teranet, which was spun off by the Ontario government in 2003, was said to be coveted for its steady cash flow. A large portion of the fund’s revenue comes from its exclusive rights to access Ontario’s electronic land registry, which it holds until 2017. Teranet collects a fee every time a home in the province changes hands or is registered.
Borealis said it has received Competition Act clearances and is working with the province of Ontario to gain approval for the transaction.
The offer has been extended to 5:00 p.m. (2200 GMT) on Nov. 10.
($1=$1.29 Canadian) (Reporting by Ka Yan Ng; Editing by Peter Galloway)