CommonWealth Rises After Offering Stock Amid ObjectionsBrian Louis
CommonWealth REIT jumped in New York trading amid speculation the company may still be a buyout target after proceeding with a share offering over the objection of its largest investors.
The stock climbed 12 percent to $25.25, the highest since July 2011.
The company yesterday priced 30 million shares at $19 each, and the offering settlement is scheduled for March 5, Newton, Massachusetts-based CommonWealth said in a statement. Investors Keith Meister and Related Cos., who together own 9.8 percent of the company, had an offer to acquire the real estate investment trust for $27 a share before the pricing.
Meister’s Corvex Management LP and Related, led by Chief Executive Officer Jeff Blau, project that CommonWealth’s real estate assets are worth about $40 a share, according to a Feb. 26 regulatory filing, and assert that poor management has driven down the value of the stock. The investors probably will continue their pursuit for change, said Mitch Germain, an analyst at JMP Securities LLC in New York.
“We anticipate Corvex will continue forward with their attempts to shake up the board, internalize management, and adopt more shareholder-aligned corporate governance,” Germain wrote in a report to investors today. “Further, Corvex now has additional time to secure firm equity commitments from third parties to pursue a take-out with more certain details.”
Meister and Related sued the company and claimed breach of fiduciary duty, seeking to stop the real estate investment trust’s plan to issue the new stock and use $450 million in proceeds to pay off debt. The $27-a-share offer was contingent upon suspension of the stock offering and meeting with the two investors within 48 hours, they said in a statement.
The investors probably will adjust their buyout offer to reflect the stock sale, John Guinee, an analyst at Stifel Nicolaus & Co. in Baltimore, said in a note today. He raised his rating on Commonwealth to hold from sell.
Joanna Rose, a spokeswoman for Related and Corvex, declined to comment. Tim Bonang, director of investor relations at CommonWealth, didn’t return a call seeking comment.
CommonWealth owns downtown and suburban office buildings and industrial properties in U.S. cities including Chicago, Denver and Philadelphia.