* Corvex, Related raise offer price to $27/share
* CommonWealth's 30 million shares offering priced at
* Investors file suit against company to stop equity
By A. Ananthalakshmi
Feb 27 CommonWealth REIT pushed ahead
with its planned equity offering even as activist investor Keith
Meister and real estate major Related Cos said they were
prepared to increase their buyout offer for the office building
Meister's Corvex and Related told the CommonWealth board
that their new proposal of $2.26 billion, or $27 per share, was
subject to CommonWealth cancelling its planned equity offering
and engaging in talks with them in the next 48 hours.
The company, however, went ahead with the offering, ignoring
the terms of the buyout offer and selling shares at $19 per
share - a 20 percent discount to the stock's Wednesday's close.
CommonWealth sold 30 million shares, three million more than
originally planned, raising $570 million from the offering,
according to two underwriters. The offering saw very little
retail participation, one of them said.
Shares of the company closed down 8 percent at $22.51 on the
New York Stock Exchange, after rising 50 percent on Tuesday.
They fell 5 percent in after-market trading on Wednesday.
The investors, who reported a combined 10 percent stake in
the company on Tuesday and made an offer of $25 per share, said
they had received expressions of interest for some of
CommonWealth's properties in excess of their earlier valuations.
Earlier on Wednesday, the investors filed suit against
CommonWealth in Maryland to prevent it from proceeding with the
The shareholders have said the equity offering and planned
debt repurchase is "value destroying."
The company did not return calls seeking comment.
Luxor Capital Group, a New York-based investment manager
owning about 8 percent of CommonWealth, has also come out in
support of Corvex and Related and demanded that CommonWealth
form an independent committee to explore strategic alternatives.
The shareholders' main point of contention is CommonWealth's
externally managed structure whereby its management is
compensated based on the assets under management, not
CommonWealth's external adviser is REIT Management &
Research LLC (RMR), which also owns interests in other publicly
"We seriously doubt that CommonWealth, a company externally
managed by RMR, fee oriented and known for weak corporate
governance, is interested in selling," Stifel Nicolaus analyst
John Guinee said.
He said RMR will use every means possible to fight the
shareholders' efforts as the proposed changes suggested by them
may threaten other RMR franchises like Select Income REIT
, Senior Housing Properties Trust and Hospitality
Shareholders point to several conflicts of interest at
CommonWealth. They say the company's incentive scheme prompts it
to make acquisitions regardless of the returns.
"There are conflicts everywhere but this (share offering) is
by far the most egregious step they have taken," said a
representative for a shareholder, who asked not to be named.
The shareholder had conveyed its concerns to the company in
December regarding any potential share offering, this person
He said management had assured them at the time that they
would not go in for an equity offering as their balance sheet
were in good shape.