Activist Investor Litt Objects to NorthStar-Colony Capital Deal

  • Shareholder says NorthStar Asset Management is undervalued
  • Litt seeks meeting with members of special committee

Jonathan Litt, the activist investor who runs Land & Buildings Investment Management, said NorthStar Asset Management Group Inc. shareholders aren’t being compensated fairly in a planned merger between the company, Colony Capital Inc. and NorthStar Realty Finance Corp.

“We strongly believe that the announced transaction price and consideration for NSAM does not fully reflect its intrinsic value today,” Litt said in a letter to management Monday. “We urge the NSAM board to engage with shareholders immediately to address the woefully inadequate nature of the transaction as currently structured.”

Colony’s earnings per share likely will be boosted by at least 30 percent, and NorthStar Realty will benefit by eliminating external management, Litt said. NorthStar Asset Management’s shareholders will receive a comparatively small accretion to their shares, while senior executives will receive about $180 million in a change-of-control payment, he said.

Land & Buildings owned almost 938,000 shares of NorthStar Asset Management, a 0.5 percent stake, as of March 31, according to data compiled by Bloomberg.

A Colony spokeswoman said she didn’t have immediate comment. A representative for the NorthStar companies didn’t immediately return a call seeking comment.

The all-stock deal will create a real estate investment trust with $58 billion of assets under management, the companies said in joint statement last week. Shareholders of each of the companies will own 33 percent or 34 percent of the new entity, which will be called Colony NorthStar Inc. Colony’s Tom Barrack will be executive chairman of the new REIT while Richard Saltzman, Colony’s chief executive officer, will be CEO. David Hamamoto, chairman of NorthStar Realty, will be executive vice chairman.

The asset-management company was spun off from NorthStar Realty Finance, a mortgage REIT, in 2014. The REIT hired a division of UBS Group AG to advise on a possible recombination in February. Litt has been pressuring NorthStar Realty to sell assets and return to an internally managed structure.

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