CLEVELAND–Forest City Realty Trust has put to rest the speculation about its acquisition. After announcing it was considering strategic alternatives last year, the board of directors has decided not to sell the REIT, based on the pricing of the offers that it has received. Instead, it is opting to give certain stakeholders in the company a greater voting share on the Board — a nod to the demands activists shareholders have been making on the REIT for the past several months.
The REIT wrote in a letter to shareholders:
To this end, we engaged in constructive discussions with certain significant stockholders of the company to identify a mutually acceptable group of new independent directors to join the Board as part of a substantial refreshment. This refreshment will help improve the company's corporate governance structure for the benefit of all stockholders and we are confident the new directors will bring substantial industry expertise and new and diverse perspectives for the benefit of our stockholders.
50 Bidders To Start
According to Forest City, there were over 50 interested buyers during the initial stage of the process, and 18 of which executed confidentiality agreements and received proprietary information about the company. An initial round of bidding at the end of October 2017 resulted in seven indications of interest, with five being all-cash offers to acquire the REIT and two offering structured deals involving a portion of the company's business. A second round of bidding kicked off with six potentially interested buyers, of which two parties submitted indications of interest to acquire the company, two submitted proposals to acquire the company's development portfolio and one party reaffirmed its interest in pursuing a structured deal for a portion of the business.
The board opted to pursue a non-binding proposal to acquire the company for $26 per share in cash. Forest City and the investor entered into a 45-day exclusivity period during which the financial investor would complete diligence and negotiate a merger agreement.
After the diligence period, however, the company made an offer for $24.50 per share in cash subject to several conditions. There was additional back and forth but ultimately a deal could not be reached.
A Reconstituted Board
Instead Forest City entered into agreements with Starboard Value LP, which owns 3% of the company's shares, Scopia Capital Management, which owns 8.3% of the shares, and RMS, Limited Partnership which, prior to the elimination of the company's dual-class stock structure, was the controlling stockholder of the company.
Under the agreement, nine current directors have agreed to resign from the Board and James A. Ratner will become Interim Chairman of the Board.
Starboard and Scopia have the right to appoint one additional director to the Board; and RMS will change its director nomination rights from four members of the Ratner family to two designees, one director who must be independent under NYSE listing standards and one director who may be either a family member or independent under NYSE listing standards. RMS has also given up its right for James Ratner to be elected Chairman of the Board.
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
