Clarke to acquire Ravelin Properties

Executive Summary

• Clarke Inc. has entered into an arrangement agreement to acquire all outstanding units and convertible debentures of Ravelin Properties REIT in a transaction valued at $1.1 billion for Ravelin (including assumed debt), resulting in a pro forma entity valued at $1.7 billion.
• The transaction addresses Ravelin's financial difficulties, including defaults on existing indebtedness, by exchanging Ravelin's debt for equity in Clarke, significantly reducing Ravelin's loan-to-value (LTV) ratio from 94.2% to an anticipated 68.5%.
• The deal is expected to close in the second quarter of 2026, subject to court approval, TSX approval, and securityholder consent, with existing Clarke shareholders retaining ~83.8% ownership and REIT securityholders receiving ~16.2%.

Key Details

• Transaction Structure: Clarke acquires all Ravelin Properties REIT units and all outstanding 9.00%, 5.50%, and 7.50% convertible unsecured subordinated debentures via a court-approved plan of arrangement.
• Valuation: Ravelin valued at $1.1 billion (including debt assumption); Pro forma entity valued at $1.7 billion.
• Consideration for REIT Unitholders: Holders receive approximately 0.582 common shares of Clarke for every 1,000 REIT units held.
• Consideration for REIT Debentureholders: Holders receive approximately 14.562 Clarke shares for every $1,000 principal amount of debentures held.
• Early Consent Incentive: Early consenting debentureholders receive a pro rata allocation of an aggregate 150,000 Clarke shares.
• Premiums: The consideration for debentureholders represents a 93% premium to the 20-day VWAP and a 171% premium to the closing price on March 26, 2026.
• Equity Issuance: Clarke expects to issue 2.5 million new common shares, representing ~19.3% of outstanding Clarke shares post-transaction.
• Post-Transaction Ownership: Existing Clarke shareholders will own ~83.8%; REIT securityholders will own ~16.2%.
• Debt Reduction: $157.95 million principal amount of REIT debentures (plus accrued interest) exchanged for Clarke shares.
• LTV Improvement: Pro forma LTV anticipated at ~68.5%, down from Ravelin's Dec 31, 2025 LTV of 94.2%.
• Secured Debt: Ravelin's secured debt remains unaffected and will be paid in the ordinary course.
• Forbearance Extension: G2S2 Capital Inc. extended the forbearance period on certain REIT loans to June 1, 2026.
• CCCA Risk: If 50%+ of debentureholders do not consent by the early consent deadline or requisite approvals are not obtained, G2S2 may commence proceedings under the Companies' Creditors Arrangement Act (CCAA) with a credit bid. In such a scenario, unitholders and debentureholders would receive no consideration.
• Closing Conditions: Requires approval of at least two-thirds of votes cast by REIT unitholders and two-thirds of aggregate principal amount of REIT debentures, plus Ontario Superior Court approval and TSX approval.
• Closing Timeline: Expected in the second quarter of 2026.
• Strategic Rationale: Provides immediate liquidity for Ravelin, reduces G&A costs, diversifies Clarke's geographic exposure (adding 11 Canadian provinces/territories plus Chicago and Ireland), and increases Clarke's public float.
• Fairness Opinion: KSV Soriano Inc. opined that the consideration is fair to unitholders and that debentureholders would be in a better financial position than in a liquidation scenario.
• Termination Fee: $1 million payable by REIT to Clarke if REIT accepts a superior proposal.

Notable Quotes

• "After considering with our external financial and legal advisers, the strategic and viable financial alternatives available to Ravelin, the board determined that this transaction is in the best interests of Ravelin and its stakeholders given the current and go-forward solvency and leverage challenges facing the REIT." — Calvin Younger, Chair of the Board of Trustees of Ravelin Properties REIT
• "The transaction will be a great outcome for both companies. It gives Ravelin securityholders the benefit of Clarke's strong, well-capitalized platform and provides an immediate solution for the capital and liquidity pressures facing the REIT." — Tom Casey, Chief Financial Officer of Clarke Inc.