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Kimco Realty

(KIM) - Get Kimco Realty Corporation (KIM) Report

solidified its status as the largest owner of grocery-anchored shopping centers in the U.S. by setting plans to acquire

Pan Pacific Retail


for $4 billion.

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Kimco will pay $70 a share in cash and assume Pan Pacific's $1.1 billion of debt. Pan Pacific owns 138 properties, totaling 22.6 million square feet, located in the Western U.S. Kimco already has interests in 1,117 properties, totaling 143.2 million square feet, in the U.S., Canada, Mexico and Puerto Rico.

"We feel very good about the quality and long-term prospects for the neighborhood shopping centers in Pan Pacific's portfolio," Kimco's Chairman and CEO Milton Cooper said in a statement. "This merger fits well with our strategy of owning the highest quality shopping center portfolio, growing our management business and generating solid investment returns for our partners and shareholders while conserving our own equity capital."

Unlike recent privatizations in the REIT sector, the merger offers no premium to Pan Pacific shareholders, since its stock closed at $70 Friday. Nonetheless, the deal could help boost the overall REIT sector, according to Deutsche Bank analyst Lou Taylor.

"As 55% of PNP is held by dedicated real estate investors, this represents $1.5 billion (55% of $2.8 billion) of recycled deal capital that will have to be reinvested in the sector. We believe this will provide some additional support for the group over the next few months," Taylor wrote in a research note.

Kimco says it may elect to issue up to $10 per share of the total merger consideration in the form of common stock.

Stuart Tanz, president and CEO of Pan Pacific, said in a statement, "We believe that this offer by the nation's largest publicly traded owner of shopping centers is in the best interest of our stakeholders and represents an attractive price that fairly reflects the value of Pan Pacific."

The merger has been unanimously approved by both companies' boards and is expected to close in the fourth quarter if it's cleared by Pan Pacific's stockholders.