Suit Seeks to Block $36B EOP Deal

Larry Kolker, an attorney with the firm, says the court will likely consolidate the suit as a class action if other shareholders file. "Kaiman hopes this suit will block the sale, unless the fiduciaries of the company can show they are causing value to be maximized," Kolker tells GlobeSt.com. No court date has been set yet, Kolker says.

The buyout includes some $16 billion in debt, as GlobeSt.com reported when the deal broke. EOP owns 580 buildings--some 108.6 million sf--in 16 states. Equity's board of trustees has unanimously approved the merger agreement and has recommended the approval of the transaction by common shareholders. The date for a vote has not been announced.

An EOP/Blackstone press release touts the $48.50 price per share is an 8.5% premium more than Equity Office's closing share price on Nov. 17 and a 20.5% premium more than the company's three-month average closing price. However, Kaiman says in the lawsuit that "the individual defendants, by their previous failure to negotiate with all interested parties, did breach their fiduciary duties. Blackstone's purchase of EOP is opportunistic and at an unfair price. First vacancy rates dropped significantly over the last few quarters and commercial rents continue to climb to record levels. Second, in the past three years, the company's stock rose 60%."

The nine-page complaint references news stories in which some analysts say that EOP may not have received the best price for the deal. "James Core, head of real estate investments at Cohen & Steers Inc. – which held 38.9 million shares as of September 2006 – stated EOP is 'worth a lot more' than $48.50 a share," according to the suit.

"Additionally, Stifel Nicolaus' analyst, John W. Guinee, stated on the morning of Nov. 20, 2006, that he believed 'EOP shareholders could have done better. Our NAV estimate was $47.70 per share," according to the lawsuit.

Also, Kaiman alleges that EOP failed "to properly pursue all offers, depriving the plaintiff and the other members of the class of the right to receive the maximum value for their shares," according to the suit.

An EOP spokeswoman tells GlobeSt.com that she has not seen the lawsuit, and thus cannot comment on it. Richard D. Kincaid, chief executive officer of EOP, said in a statement today that the offer was in the best interest of the shareholders. "When you do a deal this size, there's going to be a myriad of reactions," he said.

A spokesman for Blackstone had told GlobeSt.com on Nov. 21 that he's not surprised that people are arguing about the purchase. "That's par for the course. They're disagreeing? What else is new?" he tells GlobeSt.com.