Starwood Continues to Pursue Monmouth

Starwood Capital Group is not giving up Monmouth without a fight.

In late July, the Board of Directors for Monmouth Real Estate Investment Corporation decided to continue with its merger with Equity Commonwealth, following its receipt of an unsolicited bid from Starwood Capital Group. 

This week, Starwood laid out to Monmouth shareholders why it was the best candidate for the REIT. First, it said that its offer to acquire Monmouth for net cash consideration of $18.88 per share represents “a compelling premium” to the EQC merger offer and was the highest price offered overall. In addition, it stated that its all-cash, fixed price, fully financed proposal offered both higher value and greater certainty of execution. The offer was not only immediately actionable but also allowed Monmouth to continue paying its shareholders dividends of $0.18 per quarter.

Starwood said Monmouth Board “failed its shareholders by continuing to accept an offer with lower value.” It claimed that EQC’s all-stock structure benefitted Monmouth founders and insiders who own a small percentage of shares.

Additionally, Starwood said that the EQC merger offered “uncertain and unlikely upside by merging entities with no synergies”. It said that the Monmouth Board was “handing responsibility to a team with no obvious competitive advantages or recent experience” in the industrial sector.

“EQC and Monmouth have provided no clear strategic plan or differentiators as to why shareholders should trade certain cash value today for the prospect of uncertain upside of the merged entity,” according to Starwood’s release.

Finally, Starwood said that EQC’s offer declined in value after a sustained sell-off of the EQC stock after the Monmouth transaction was announced. At the time of the release, it said the implied merger consideration is now $176 million (9.2%) below what the Monmouth Board announced on May 4, 2021.

Starwood’s first offer for Monmouth came at the beginning of July, under which Starwood would acquire 100% of the outstanding equity of Monmouth for $18.88 per Monmouth common share. Monmouth’s common shares closed at $19.10 per share on July 21. Starwood then amended the purchase price to $19.51 per share. 

Despite these arguments, towards the end of July Monmouth’s Board determined that the pending transaction with EQC represented the best opportunity to maximize value for Monmouth stockholders. 

“As a Board, we carefully considered the unsolicited proposal and its amendment, and noted it is less than the proposal previously submitted by Starwood Capital as part of our strategic review process,” said Brian Haimm, Lead Independent Director of Monmouth, said in a prepared statement at the time.  “We ran an exhaustive strategic alternatives process, and carefully considered Starwood Capital’s all-cash proposal, among a number of other strategic alternatives. Ultimately, the Board unanimously concluded⁠—and has now unanimously reaffirmed⁠—that the EQC transaction is the best path forward for Monmouth stockholders.”