399 Park Ave., headquarters of both NorthStar companies, which will merge with Colony Capital.

NEW YORK CITY and LOS ANGELES—The would-be merger partners in what will be called Colony Northstar Inc. said Monday they had amended their agreement to incorporate changes to the governance structure. The move by NorthStar Asset Management Group Inc., Colony Capital Inc. and NorthStar Realty Finance Corp. follows calls for changes by activist investor Jonathan Litt, who has threatened to vote against the tripartite merger.

As part of the amended agreement, the new REIT's board will be reduced from the 13 directors originally proposed to 10. It will include two new independent directors, Jon A. Fosheim and Douglas Crocker II, among five jointly selected by NSAM and NRF. Colony Capital will also select five directors.

The board will stand for election on annual basis under the amended agreement. The merged entity will opt out of all of the provisions of the Maryland Unsolicited Takeover Act that would have permitted Colony NorthStar's board to adopt, without stockholder approval, a classified board structure and other anti-takeover provisions. And David Hamamoto, executive chairman of NSAM, has agreed to step down from the Colony NorthStar board if his equity investment falls below 50% of his equity interest as of the closing of the transaction.

All of these changes were advocated by Litt, founder and CIO of Land and Buildings Investment Management LLC, which controls approximately 2% of NSAM stock. In his view, for example, a 13-member board could be “unwieldy and expensive.” Litt made his concerns known in a Sept. 14 letter to shareholders in NSAM, which he believes would be substantially undervalued in the planned merger.

The management of NSAM, CLNY and NRF plan to hold their respective shareholder meetings prior to the end of the year and close the merger this coming January. In connection with the merger, NSAM is being advised by Goldman Sachs and is receiving legal counsel from Sullivan & Cromwell LLP, compensation and benefits counsel from Goodwin Procter LLP and tax counsel from Skadden, Arps, Slate, Meagher & Flom LLP and Hunton & Williams LLP. NSAM's special committee is being advised by Evercore and is receiving legal counsel from Fried, Frank, Harris, Shriver & Jacobson LLP and Morris, Nichols, Arsht & Tunnell LLP.

BofA Merrill Lynch is acting as lead financial advisor to Colony, while Barclays, Credit Suisse, Deutsche Bank, JP Morgan and Morgan Stanley are also acting as financial advisors in connection with the transaction. Willkie Farr & Gallagher LLP is acting as legal counsel to Colony, and Hogan Lovells LLP is acting as tax and Maryland counsel to Colony. Vinson & Elkins LLP is acting as legal and tax counsel to NRF. UBS Investment Bank is acting as exclusive financial advisor and Venable LLP is acting as legal counsel to NRF's special committee.