SUPERIOR COURT OF JUSTICE – ONTARIO

COMMERCIAL LIST

RE: IN THE MATTER OF A PROPOSED PLAN OF ARRANGEMENT involving Gazit America Inc.

BEFORE: D. M. Brown J.

COUNSEL:
Laura Fric and Raphael Eghan, for the Applicants

Andrew Gray, for First Capital Realty Inc.

Christine Tabbert, for Gazit-Globe Ltd.

HEARD: August 7, 2012

REASONS FOR DECISION

I. Application to approve a plan of arrangement

[ 1 ] Gazit America Inc. seeks a final order approving a plan of arrangement pursuant to section 182 of the Ontario Business Corporations Act .

II. The proposed plan of arrangement and the interests being arranged

[ 2 ] Incorporated under the OBCA Gazit America acquires and develops medical office, health care retail and mixed use properties. As at June 26, 2012, there were 23,308,152 common shares outstanding of Gazit America (the “Gazit America Shares”). Gazit-Globe Ltd. is an Israeli company which owns and operates supermarket-anchored shopping centres. First Capital Reality Inc. is an OBCA corporation which develops and operates shopping centres, supermarkets, drugstores and other properties.

[ 3 ] The proposed plan of arrangement resulted from arm’s length negotiations amongst Gazit America, Gazit-Globe and First Capital. Under the plan First Capital indirectly will acquire the medical office and retail properties of Gazit America and the related debt, and Gazit-Globe, through its acquisition of all of the Common Shares of Gazit America not already beneficially owned by it, indirectly will acquire Gazit America’s 12.4% interest in Equity One and will inherit the related deferral tax liability and assume certain indebtedness.

[ 4 ] Under the arrangement holders of the Gazit America Shares, other than Gazit Maple, will receive a cash payment and a fraction of a share of First Capital valued, as at July 24, 2012, at $7.65 per Common Share, a premium of slightly over 50% of the 20-day trading volume for the Common Shares as at May 3, 2012. Consideration will also be payable to 2010 Warrant-holders, 2011 Warrant-holders, Option-holders and holders of Deferred Share Units.

[ 5 ] As described in the affidavit of Gail Mifsud sworn June 25, 2012, as well as in the detailed factum filed by Gazit America, on June 20, Gazit America, First Capital and Gazit-Glboe entered into an Arrangement Agreement. On June 27, 2012, C. Campbell J. granted an Interim Order for the process leading up to and including the holding of the special meeting of Gazit America Shareholders on August 2, 2012 (the “Meeting”).

[ 6 ] That meeting was held. A quorum was present. Of the 22,449,824 votes cast in person or by proxy, 21,979,062 were cast in favour of the Arrangement Resolution. The Arrangement Resolution was approved by 97.9% of all of the votes cast by the Shareholders, and was approved by 83.62% of the Minority, or Un-Interested, Shareholders. As set out in the Circular, the Arrangement Agreement provided for dissent rights. No Gazit America Shareholder exercised dissent rights. No person appeared on the return of the application to oppose the Final Order sought.

III. Governing principles

[ 7 ] The principles to be considered by a court in deciding whether to approve a plan of arrangement were set out by the Supreme Court of Canada in BCE Inc. v. 1976 Debentureholders , 2008 SCC 69 , [2008] 3 S.C.R. 560 . In sum, to grant a final order approving an arrangement a court must be satisfied that (i) t he proposal constitutes an “arrangement” within the meaning of the OBCA ; t he applicant has complied will all statutory and court-mandated requirements; t he application has been put forward in good faith; and, t he arrangement is fair and reasonable.

A. Is the proposed transaction an “arrangement”?

[ 8 ] The proposed transaction is an “arrangement” within the meaning of section 182(1)(f) of the OBCA , and the applicant is a “corporation” within the meaning of that Act.

B. The statutory and court-ordered procedures

[ 9 ] The affidavit sworn by Gail Mifsud on August 1, 2012, established that Gazit America had satisfied the procedural requirements contained in the Interim Order. The evidence filed satisfies me that the Gazit America has met and complied with the procedures for an arrangement imposed by the OBCA .

C. Analysis for fairness and reasonableness

C.1 Was the application put forward in good faith?

[ 10 ] Gazit America has demonstrated that it is putting the application forward in good faith. The evidence filed by Gazit America described how the company responded to an April, 2012 proposal by Gazit-Globe and First Capital involving the privatization of Gazit America: the Board struck a Special Committee comprised of independent directors; the Special Committee retained a financial advisor, Brookfield Financial, and independent counsel, Stikeman Elliott LLP; the Special Committee, with the assistance of its financial and legal advisors, considered the Transaction Proposal made in early May, 2012 and pursued negotiations with Gazit-Globe and First Capital, ultimately recommending the proposal to the Board on June 20; and, the Board approved the Arrangement. During this process Gazit America was provided with a favourable fairness opinion by Brookfield Financial.

[ 11 ] In paragraph 28 of her June 25, 2012 affidavit Ms. Mifsud reviewed in detail the factors considered by the Special Committee and the Board in deciding to recommend the plan of arrangement, including the position taken by its controlling shareholder, Gazit-Globe. Those factors indicate that the Board gave extensive thought to the strategic options available to the company, as well as the benefits and alternatives available to the company and its Shareholders.

C.2 Does the arrangement have a valid business purpose?

[ 12 ] For similar reasons the Arrangement has a valid business purpose.

C.3 Are the objections of those whose legal rights are being arranged under the arrangement being resolved in a fair and balanced way?

[ 13 ] The Board determined that the Arrangement was in the best interests of Gazit America and its Shareholders. The Board sent to all Shareholders and affected warrant holders, option holders and holders of DSUs a detailed Circular explaining the purpose of the Arrangement and describing the Arrangement. The Circular explained that the Arrangement Agreement made provision for dissent rights, and the Circular described how a Shareholder could exercise dissent rights. The Meeting Materials also included a copy of the Notice of Application in this proceeding. As noted above, at the special meeting held on August 2, 2012 Gazit America Shareholders overwhelmingly voted in favour of the Arrangement resolution, including support by a majority of the minority. No Shareholder exercised dissent rights, and no person appeared to oppose this application. Taken together, all this evidence supports a finding that the Arrangement is fair and reasonable.

IV. Conclusion and orders

[ 14 ] For these reasons, I approve the Arrangement, and I have signed the Final Order submitted by Gazit America.

D. M. Brown J.

Date : August 7, 2012