CLEVELAND, March 22, 2018 /PRNewswire/ -- Forest City
Realty Trust, Inc. (NYSE: FCEA) ("Forest
City" or the "Company") announced today that its Board of
Directors concluded its previously announced review of strategic
alternatives. After extensive evaluation and deliberation,
including review and analysis of multiple offers, the Board has
determined that stockholder value would be better enhanced on a
standalone basis than by pursuing a transaction on the terms and
pricing indicated by the offers received.
The Board has issued a letter to stockholders in connection with
the conclusion of its review. The full text of the letter
follows:
Dear Stockholders of Forest City
Realty Trust, Inc.:
We are writing to report on the
conclusion of the Board's strategic review process and on
governance changes we have agreed to going forward.
The Board of Directors announced a
review of the Company's strategic, operating, financial and
structural options to enhance stockholder value on September 11, 2017. The announcement of this
review followed from the governance-enhancing collapse of the
dual-class voting structure at the 2017 Annual Meeting and feedback
we received from stockholders during our extensive outreach
following the 2017 Annual Meeting. In order to execute the
strategic review, the Company retained financial advisors led by
Lazard together with Goldman Sachs & Co. LLC. Additionally, the
Board established a Transaction Committee constituted by a majority
of independent directors to oversee the review process and provide
guidance and instruction to management of the Company and the
Company's financial advisors between Board meetings.
The Company's financial advisors
communicated with over 50 potentially interested buyers during the
initial stage of the process, and 18 of those parties executed
confidentiality agreements and received confidential information
about the Company. An initial round of bidding at the end of
October 2017 resulted in seven
non-binding preliminary indications of interest – five represented
all-cash offers to acquire the Company and two contemplated
structured, tax-efficient transactions involving a portion of the
Company's business. The Board then authorized a second round of
bidding with six potentially interested buyers. Second round
indications of interest were received beginning in mid-December.
Two parties submitted non-binding indications of interest to
acquire the Company, two submitted proposals to acquire the
Company's development portfolio and one party reaffirmed its
interest in pursuing a structured, tax-efficient transaction for a
portion of the Company's business. The two full Company acquisition
proposals and a structured, tax-efficient portfolio transaction
were conditioned on a grant of exclusivity to the potentially
interested buyers.
Following a review of each
indication of interest and negotiation of the two full Company
acquisition proposals, the Board determined to pursue the
non-binding proposal to acquire the Company for $26 per share in cash, which was submitted by a
large financial investor with a strong track record of executing
large, complex real estate and corporate transactions. A majority
of the Board viewed the proposal as potentially attractive for
stockholders. On this basis, the Company and the financial investor
mutually entered into a 45-day exclusivity period during which the
financial investor would complete confirmatory diligence and
negotiate a fully financed merger agreement at $26 per share in cash with conditions to closing
customary for transactions of this type.
An extension to the exclusivity
period was granted through March 9,
2018 to permit the counterparty to complete its confirmatory
diligence. The financial investor submitted a letter on
March 7, 2018 (the "March 7 Proposal") that it was prepared to make a
fully financed, binding proposal to acquire the Company for
$24.50 per share in cash subject to:
(i) cessation of future dividend payments, (ii) obtaining certain
JV partner consents to a change of control prior to signing a
definitive agreement, (iii) obtaining certain government consents
to a change of control related to Company assets and development
projects prior to closing and (iv) the Company completing an
internal reorganization prior to closing to facilitate the
counterparty's financing plans, which plans were not provided in
connection with the March 7 Proposal
or thereafter. The Transaction Committee unanimously determined
that it would not recommend a transaction on the terms and pricing
contemplated by the March 7 Proposal
to the Board, and instructed the Company's financial advisors to
inform the counterparty in the event it wished to revise its
proposal in advance of a Board meeting on March 10. The counterparty did not so revise its
proposal, and on March 10, the Board
unanimously accepted the recommendation of the Transaction
Committee to reject the March 7
Proposal and a majority of the Board authorized the Company's
financial advisors to inform the counterparty that the Board would
be supportive of a transaction at $25.50 per share in cash with dividends paid
through closing, and no conditions with respect to third-party
consents or completion of an internal reorganization. The
counterparty responded on March 13
(the "March 13 Proposal") with a
revised price of $25.00 per share in
cash subject to: (i) cessation of future dividend payments and (ii)
a willingness to review in more detail the projects for which
third-party consents might be required for a change of control
transaction with the goals of reaching consensus about the relevant
projects, developing a more complete understanding of the means and
prospects for obtaining consents on a timely basis and developing a
mutually agreeable solution to allocating any risk associated with
third-party consents. Between March 13 and
March 16, the Company, the financial investor, and their
respective advisors held a series of diligence calls for the
purpose, among others, of confirming whether the financial investor
would be prepared to eliminate third-party consents as a condition
to signing and closing a transaction. On March 16, the counterparty communicated to our
advisors that while the Company had presented reasonable bases to
conclude that many of the requested third-party consents were not
required, as a commercial matter, it was not willing to eliminate
some portion of the previously identified third-party consents as a
condition to either signing or closing.
After evaluation and deliberation
the Board unanimously decided not to pursue a transaction on the
terms and pricing of the March 13
Proposal. The Board concluded that stockholder value would be
better enhanced on a standalone basis and that the conditional
requirements specified by the counterparty in the March 13 Proposal created more uncertainty around
a potential transaction than the Board was prepared to accept.
Having completed an extensive
strategic review process, the Board remains focused on enhancing
value for all stockholders. To this end, we engaged in constructive
discussions with certain significant stockholders of the Company to
identify a mutually acceptable group of new independent directors
to join the Board as part of a substantial refreshment. This
refreshment will help improve the Company's corporate governance
structure for the benefit of all stockholders and we are confident
the new directors will bring substantial industry expertise and new
and diverse perspectives for the benefit of our stockholders. We
also thank the directors that will not be continuing for their
distinguished service and dedication to the Company and the
leadership and integrity that has been a hallmark of their
tenures.
The Board remains committed to
pursuing the right course of action for the Company and all
stakeholders, and to that end we believe the Company is well
positioned to create and sustain stockholder value under the
governance of a new group of independent directors. We expect to
deliver strong returns to stockholders over time through (i)
leveraging the Company's scale in core, high-barrier-to-entry
markets, (ii) taking advantage of embedded growth from the
development activities and accretive partner buyouts, (iii)
continuing to focus on margin enhancement and (iv) returning
additional capital to stockholders via dividend growth and share
repurchases.
Sincerely,
James A. Ratner
Chairman
Scott S. Cowen
Lead Independent Director
Reconstituted Board
Forest City also announced that it has entered
into agreements with Starboard Value LP ("Starboard"), which
currently owns approximately 3.0% of the Company's outstanding
shares, Scopia Capital Management LP ("Scopia"), which currently
owns approximately 8.3% of the Company's outstanding shares, and
RMS, Limited Partnership ("RMS"), which, prior to the elimination
of the Company's dual-class stock structure, was the controlling
stockholder of the Company, pursuant to which:
- Nine current directors have agreed to resign from the
Board;
- Michelle Felman, Adam S. Metz, Marran H.
Ogilvie, William 'Butch' Roberts and Robert A. Schriesheim have been elected,
effective upon completion of customary onboarding background
reviews, as new independent directors to the Company's Board;
- James A. Ratner will become
Interim Chairman of the Board. The reconstituted Nominating and
Governance Committee will promptly initiate a process to identify
and recommend a new Chairman or Executive Chairman of the Board.
Candidates will include both new Board members as well as external
candidates that are seasoned real estate industry executives or
professionals;
- The reconstituted Nominating and Governance Committee will also
promptly initiate a process to identify an additional independent
director to join the Board;
- Each of Starboard and Scopia will have the right to appoint one
additional director to the Board; and
- RMS has agreed to alter its director nomination rights from
four members of the Ratner family to two designees, one director
who must be independent under NYSE listing standards and one
director who may be either a family member or independent under
NYSE listing standards. Butch
Roberts will serve as the independent RMS nominee. RMS has
also given up their right for James
Ratner to be elected Chairman of the Board, and he will
resign from the Chairmanship upon appointment of the new Chairman
identified by the process referred to above.
The Company also announced that David
LaRue, Kenneth Bacon, Z.
Jamie Behar and James Ratner will continue their service on the
Board. All members of the newly reconstituted Board will stand for
election at the Company's 2018 Annual Meeting. Following completion
of onboarding and appointments, the Board will be comprised of 13
directors, 11 of whom will be independent.
The agreements will be filed on a Form 8-K with the U.S.
Securities and Exchange Commission.
Share Repurchase Authorization
The Board has
also approved an increase in the Company's existing $100 million share repurchase program to an
aggregate total of $400 million. The
shares may be repurchased, in light of prevailing market and
economic conditions, to take advantage of investment opportunities
at times when the Board and Company management believe the market
price of the common stock does not accurately reflect the
underlying value of the Company; to indicate to investors the
Company's confidence in its business; to enhance stockholder value;
and to reduce dilution.
Purchases may be made in the open market or otherwise, and in
such amounts and at such times and prices as the Board and
authorized officers determine, provided that all purchases comply
with regulations and guidelines of the Securities and Exchange
Commission. Repurchase of shares under the program will be subject
to the limitations and requirements set forth in the Company's
credit facility and indentures.
This program does not obligate the Company to acquire any
particular amount of common stock. The program may be suspended,
modified, or discontinued at any time at the discretion of Company
management as conditions change as to the market price, need or
other factors. The program has no set expiration date.
About Kenneth J. Bacon
Kenneth J. Bacon has been a Forest City director since 2012 and serves on
the Board's Audit and Corporate Governance and Nominating
committees. In 2012, Bacon co-founded RailField Partners. Bacon
previously served in various positions at Federal National Mortgage
Association (Fannie Mae), including vice president of the northeast
region, leading the American Communities Fund, senior vice
president of the multifamily division, and executive vice
president. Prior to joining Fannie Mae, Bacon served as director of
policy for the oversight board and director of securitization at
Resolution Trust Corporation. Bacon began his career with
Kidder Peabody and later Morgan
Stanley. Bacon is a board member of three additional publicly
traded companies: Comcast Corporation, Ally Financial Inc, and
Welltower Inc. He is also a board member of the National
Multifamily Housing Council and serves on the advisory board of the
Stanford Center on Longevity.
About Z. Jamie Behar
Z. Jamie Behar has been a Forest City director since April 2017. She serves on the Board's Audit and
Corporate Governance and Nominating committees. Behar previously
served as the managing director, Real Estate & Alternative
Investments, at GM Investment Management Corp (GMIMCo) from 2005 to
2015. Behar started at GMIMCo as a portfolio manager in 1986. As a
company director, Behar served on the board's investment
management, private equity investment approval and risk management
committees. Behar also serves as an independent director for
Gramercy Property Trust and Sunstone Hotel Investors, Inc. She was
previously board chair of the Pension Real Estate Association and
was a member of the Real Estate Investment Advisory Council of the
National Association of Real Estate Investment Trusts.
About Michelle Felman
Michelle Felman currently serves on the Advisory
Board at Turner Impact Capital, a social impact platform that
focuses on charter schools and workforce housing. She is a
Trustee of Choice Properties, a listed retail REIT spun off by
Loblaws Companies Limited, where she serves on the Governance and
Comp Committees, and of The Partners Group (PGPHF), a global
private equity firm, where she serves as the Chair of the
Investment Oversight-Committee. Felman is a Board member of
Reonomy, a private real estate technology company. Felman is also
on the Board of Directors of Cumming Corp, a global project
management and cost consulting company. Felman is a founder of
JAM Holdings, an investment and advisory firm. From 1997-2010,
Felman served as the Executive Vice President – Co-Head of
Acquisitions and Capital Markets for Vornado Realty Trust and
remained a consultant to VNO through December 2012. She began her career at Morgan
Stanley in the Investment Banking Division and later joined GE
Capital as a Managing Director of Business Development.
About David J. LaRue
David J. LaRue became a director of Forest City in June
2011 when he also became President and CEO of the Company.
LaRue also serves as an officer and/or director of various
subsidiaries of the company. Prior to becoming President and CEO,
he served as Executive Vice President and Chief Operating Officer.
Earlier in his tenure with the company, LaRue served as President
and Chief Operating Officer of the company's Commercial Group.
Prior to joining Forest City in
1986, LaRue was an internal auditor and financial analyst with The
Sherwin-Williams Company. He formerly served on the board of
CubeSmart, NAREIT, the Real Estate Roundtable, and the
International Council of Shopping Centers. LaRue is currently a
member of the board of trustees and executive committee, and chair
of the capital committee of the Friends of the Cleveland School of
the Arts; a trustee and member of the finance committee of the
Lawrence School; and is on the boards of St. Edward High School and
the Greater Cleveland Partnership.
About Adam S. Metz
Adam
S. Metz is currently Managing Director and Head of
International Real Estate at The Carlyle Group. He will be retiring
from Carlyle in April of
2018. Most recently, Metz served as Senior Advisor to TPG
Capital's Real Estate Group. Prior to joining TPG in April 2011, Metz was the Chief Executive Officer
of General Growth Properties, Inc. from 2008 to 2010. Before
joining GGP, Metz was co-founding partner of Polaris Capital LLC.
Metz has previously held roles such as Executive Vice President and
Chief Investment Officer of Rodamco, North America, numerous positions with Urban
Shopping Centers, Inc., Vice President in the Capital Markets group
of JMB Realty, and Corporate Lending Officer in the Commercial Real
Estate Lending Group at The First National Bank of Chicago. Metz currently serves on the advisory
boards of the real estate programs at both Cornell University and Northwestern University.
About Marran H. Ogilvie
Marran H. Ogilvie was a member of Ramius, LLC,
an alternative investment management firm, where she served in
various capacities from 1994 to 2009 before the firm's merger with
Cowen Group, including as Chief Operating Officer and General
Counsel. Following the merger, Ogilvie served as Chief of Staff at
Cowen Group, Inc. until 2010. She currently serves as an Advisor to
the Creditors Committee for the Lehman Brothers International
(Europe) Administration. She also
serves as a director of Evolution Petroleum, a developer and
producer of oil and gas reserves, Ferro Corporation, a supplier of
functional coatings and color solutions, Four Corners Property
Trust, a REIT for which she chairs the Audit Committee, LSB
Industries, Inc. a manufacturing company, and Bemis Company, Inc, a
plastic packaging company. Ogilvie previously served as a Director
for Southwest Bancorp, a regional commercial bank, Zais Financial
Corp., a REIT, Seventy Seven Energy Inc., an oil field services
company, and the Korea Fund, an investment company.
About James A. Ratner
James A. Ratner is a current Forest City Director. Ratner previously served
as Executive Vice President of Development for Forest City and has served as an
officer/director of various subsidiaries of the Company. Ratner
serves on the board of NACCO Industries, Inc. Additionally, he
serves as chairman of the board of trustees of The Playhouse Square
Foundation, serves on the executive committee and the board of
trustees of The Cleveland Museum of Art and serves on the board of
trustees of Case Western Reserve
University.
About William R. 'Butch' Roberts
William R. Roberts began his career at an
organization he would later lead. With more than 35 years of
experience in business, operations and strategy, Roberts today
shares his knowledge and expertise with clients as president of the
W.R. Roberts Company. Roberts began his career with the
Chesapeake and Potomac Telephone
Company, which later became Verizon, Washington, D.C., as a business office
manager. He held positions of increasing responsibility in
Operations, Human Resources, Marketing, Public Affairs, and
Government Relations, before assuming responsibility in 2000 for
Verizon's public policy initiatives in Maryland, as president. Subsequently in 2007,
he was named region president of Verizon Maryland and the
District of Columbia, overseeing
all of the company's operations in those areas. He retired in 2011,
following 32 years of service. As of 2018, he is immediate past
Chairman of the Board of Directors for MedStar Health, the largest
not-for-profit healthcare system in Maryland and the Washington, D.C., region. Additionally, he has
served as board chairman the Baltimore branch of the Federal Reserve Bank
of Richmond.
About Robert A. Schriesheim
Robert A. Schriesheim, is a director of
Houlihan Lokey, a publicly traded
global investment banking firm, NII Holdings (formerly Nextel
International), a publicly traded provider of wireless
communications services in Latin
America, Skyworks Solutions, a publicly traded provider of
wireless semiconductor solutions and of FirstAdvantage a
privately-held portfolio company of private equity firm Symphony
Technology Group. He served as Executive Vice President and Chief
Financial Officer of Sears Holdings from August 2011 until October
2016 and as a Senior Advisor until January of 2017. From
January 2010 to October 2010, Schriesheim was Senior Vice
President and Chief Financial Officer of Hewitt Associates, a
global human resources consulting and outsourcing company that was
acquired by Aon in October 2010. From
2006 until 2009, he was Executive Vice President and Chief
Financial Officer of Lawson Software, a publicly traded ERP
software provider. Previously, Schriesheim was affiliated with ARCH
Development Partners, LLC, a seed stage venture capital fund and
earlier he held executive positions at Global TeleSystems, SBC
Equity Partners, Ameritech, AC Nielsen, and Brooke Group Ltd.
Previously he served as a director of a number of publicly traded
companies including Lawson Software from 2006 until its sale in
July 2011 to Infor and Golden Gate
Capital, Dobson Communications from 2004 to 2007, a rural wireless
services communications company that was acquired by AT&T, and
as Co-Chairman of MSC Software from 2007 to 2009 a provider of
integrated simulation solutions for designing and testing
manufactured products that was acquired by Symphony Technology
Group and of Georgia Gulf Corporation, an industrial chemicals
manufacturer, from 2009 to 2010.
About Forest City
Forest City Realty Trust,
Inc. is an NYSE-listed national real estate company with
$8.1 billion in consolidated assets.
The Company is principally engaged in the ownership, development,
management and acquisition of commercial, residential and mixed-use
real estate in key urban markets in the
United States. For more information, visit
www.forestcity.net.
Forward-Looking Statements
This press
release contains forward-looking statements. Such forward-looking
statements reflect management's current views with respect to
future, not past, events and often address the Company's expected
future actions and performance. Forward-looking statements may be
identified by the use of words such as "expect," "intend," "plan,"
"estimate," "project," "believe," "anticipate," "target" and
similar words and phrases. These forward-looking statements are not
guarantees of future events and involve risks, uncertainties and
assumptions that are difficult to predict. All statements regarding
the Board's review of operating, strategic, financial and
structural alternatives and associated costs and benefits,
including whether standalone plan could enhance value are
forward-looking. Actual developments and business decisions may
differ materially from those expressed or implied by such
forward-looking statements. Important factors, among others, that
could cause the Company's actual results, financial or otherwise,
and future actions to differ materially from those described in
forward-looking statements include the risks discussed in the
Company's documents filed with the SEC, including the Company's
Annual Report on Form 10-K for the year ended December 31, 2017, quarterly reports on Form 10-Q
and Current Reports on Form 8-K.
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SOURCE Forest City Realty Trust, Inc.