Zell’s New Takeover Terms for Monmouth Opposed by Blackwells


Blackwells Capital has come out against the sweetened terms of a proposed takeover of Monmouth Real Estate Investment Corp. by Sam Zell’s Equity Commonwealth.

Equity Commonwealth bumped up its bid for the industrial real estate company Monday to about $3.4 billion, including debt. Under the revised terms, investors could opt for $19 in cash or 0.713 of an Equity Commonwealth share for each Monmouth share they own on a prorated basis. Monmouth’s board unanimously supported the revised terms, which it said offered greater value and optionality to address the preferences of its diverse shareholder base.

New Jersey-based Monmouth agreed to be acquired by Equity Commonwealth in an all-stock deal that would be currently valued at about $2.8 billion, including debt. Starwood Capital Group subsequently emerged with an all-cash bid of $18.88 a share that Monmouth’s board rejected. 

Blackwells came out against the terms of the original deal and has also nominated four directors to Monmouth’s board. 

Blackwells, which owns more than 4% of Monmouth, said in a statement Tuesday that it still believes the price undervalues the company. It contends Monmouth’s full and fair value is $26 to $30 a share. It also noted that the terms of the original offer were $19.40 a share before declines in Equity Commonwealth’s stock reduced the offer price.

“The Monmouth board somehow managed to re-negotiate a worse deal for shareholders,” Blackwells said in the statement. 

Given the cash cap of $641 million in the revised terms, its unlikely that Monmouth shareholders who elect cash will receive 100% of the cash consideration, it added. 

“Blackwells further notes that the strategic alternatives process was flawed from the beginning –- with a conflicted committee of directors who were focused on tax efficiency rather than value maximization,” Blackwells said. “The best answer for shareholders is to reject the proposed transaction, reconstitute the board and have a new strategic alternatives process that will maximize value.”

A representative for Monmouth wasn’t immediately available for comment on the criticism by Blackwells. Starwood hasn’t commented on the revised terms of the deal. 

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