NEWTON, MA-CommonWealth REIT said late Thursday afternoon it had received an unsolicited offer from Corvex Management LP and Related Fund Management LLC to buy 100% of its common stock at $24.50 per share, or approximately $2.9 billion. The two companies, which together own about 9% of locally based CWH's stock, turned up the heat in a letter to the REIT's board on Thursday, stating that they'd seek to remove the board if their offer wasn't accepted.
Corvex and Related first submitted an unsolicited bid of $27 per share for the common stock on Feb. 25. The two companies noted in the letter that the offer could be subject to “further downward adjustment” if CWH goes ahead with a possible sale of its controlling stake in Select Income REIT.
“We continue to believe that CWH is significantly undervalued due to its obsolete externally advised management structure and flawed corporate governance,” Corvex's Keith Meister and Related's Jeff Blau wrote on Thursday. “We firmly believe that taking the proper steps, including but not limited to termination of the management agreement with REIT Management & Research LLC, adoption of corporate governance best practices, cessation of related party transactions, and shareholder-friendly capital allocation, will create significant value for all CWH shareholders. However, in light of your recent actions, we have unfortunately concluded that you as a board are not prepared to independently undertake or evaluate any such value enhancing steps.”
As a result, wrote Meister and Blau, “we are left with three options.” One is a negotiated sale of CWH to Corvex and Related; another is a sale of the REIT to a third party willing to pay more than Corvex and Related; and the third is removal of the board through a two-thirds majority vote of shareholders. Should CWH not exercise either of the first two options, Meister and Blau wrote that they believe “there is a clear path for us to remove all of you as trustees in the near term.”
In a statement, CWH said Thursday that its board would “carefully review the indication of interest” in consultation with its legal and financial advisors, and pursue the course of action that it believes is in the best interests of CWH and its shareholders.
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