ISS Recommends Monmouth Investors Vote Against EQC Deal in Light of Starwood REIT Offer
Institutional Shareholder Services Inc. (ISS), an independent proxy advisory firm, has recommended that Monmouth Real Estate Investment Corp. vote against its proposed merger with Equity Commonwealth.
Institutional Shareholder Services Inc. (ISS), an independent proxy advisory firm, has recommended that Monmouth Real Estate Investment Corp. (NYSE: MNR) shareholders vote against a proposed merger with Equity Commonwealth (NYSE: EQC), a publicly traded REIT founded by Sam Zell. Monmouth shareholders will vote on the transaction at a special meeting on August 24th.
In May, Monmouth, a publicly traded industrial REIT, agreed to be purchased by Equity Commonwealth in a deal valued at approximately $3.4 billion, including debt. Monmouth investors would receive 0.67 shares of Equity Commonwealth for each share they own.
As reported by The DI Wire late last month, Starwood Real Estate Income Trust Inc., a non-traded REIT sponsored by Starwood Capital, recently submitted an all-cash acquisition proposal to acquire Monmouth for net cash consideration of $18.88 per share ($19.51 per share reduced by the termination fee owed to EQC of $0.63 per share).
After Monmouth’s board rejected the proposal, Starwood filed a preliminary proxy statement urging Monmouth shareholders to vote against the deal with Equity Commonwealth.
Starwood said last week that its proposal offered a 9.4 percent premium to the implied Equity Commonwealth merger consideration of $17.25 per share, based on the $25.75 closing price of Equity Commonwealth’s shares on August 4, 2021. EQC closed at $26.18 per share on Tuesday, up $0.03 from the previous close.
In its report, ISS stated that “…support is not warranted for the proposed [Equity Commonwealth] transaction, particularly in light of the greater value and certainty of the Starwood proposal.”
“In consideration of [Equity Commonwealth’s] limited presence in industrial real estate, and the noticeable gap between [Equity Commonwealth’s] recent industrial acquisition history and the billions of dollars of acquisitions that are planned for the combined company, there remains substantial uncertainty that the combined company will be able to execute on the post-transaction opportunities touted by [Monmouth’s] board,” the ISS report stated.
Monmouth, commenting on the ISS report, said, “We disagree with ISS’ voting recommendation and look forward to continuing to engage with our stockholders in the weeks ahead. The Monmouth board and management team remain committed, as we have shown throughout our 53-year history as a public REIT, to maximizing value for our stockholders. Our board continues to believe that the merger with [Equity Commonwealth] represents the best way to achieve that goal.”
Monmouth shares closed at $19.10 on Tuesday, up $0.04 from the previous day.
Starwood Real Estate Income Trust Inc., which invests in stabilized real estate across the United States and Europe, raised $3.9 billion in its initial public offering from December 2017 to June 2021. The REIT’s $10 billion follow-on offering was declared effective in early June 2021 and has raised $500 million, as of mid-July 2021. As of June 30, 2021, the REIT’s aggregate NAV was $4.1 billion.
Starwood Capital Group is a private investment firm with a core focus on global real estate, energy infrastructure and oil and gas. The firm has raised more than $60 billion and currently has approximately $90 billion of assets under management.
