Blackwells Capital has made an unsolicited proposal to acquire the portion ofMonmouth Real Estate Investment Corp. that it doesn’t already own in a transaction valued at about $3.8 billion, including debt, according to people familiar with the matter.
The all-cash offer at $18 a share was made Friday, and is the second time Blackwells has proposed acquiring the remaining interest in the industrial real estate investment trust, the people said, asking not to be identified because the matter is private. The offer price is a 6% premium to Monmouth’s closing share price Friday, and about a 22% premium to the price on Dec. 1 when Blackwells made the previous offer, which was rebuffed.
New York-based Blackwells has called on Monmouth’s board to create a special committee to review the proposal that excludes affiliates and members of the company’s founding Landy family, the people said. It has asked that the company engage in exclusive bilateral talks with Blackwells followed by a go-shop period if a deal can be reached, they said.
A representative for Blackwells declined to comment. A representative for Monmouth wasn’t immediately available for comment.
Blackwells, which owns less than a 5% stake in Monmouth, believes the company is undervalued and has underperformed its peers, the people said. Blackwells believes there are several reasons for Monmouth’s underperformance, including its poor capital allocation and weak corporate governance, and could more effectively make the changes it needs as a private company, they said.
Chief among those concerns is the expensive financing it has taken on to fund its expansion over the years, and the company’s portfolio of securities in other REITs that have been a drag on earnings, the people said. Monmouth said last month it had more than $10 million in unrealized losses on its securities portfolio during its fiscal fourth quarter. At the end of September, those investments includedCBL & Associates Properties, which filed for bankruptcy protection in November, according to regulatory filings.
Blackwells also believes Monmouth’s 13-member board is too large for a company with only 14 full-time employees, and that it’s populated with friends and members of the founding Landy family, the people said. Three family members – Chairman Eugene Landy, Chief Executive Officer Michael Landy and Samuel Landy — are among the directors who are expected to stand for re-election at this year’s annual general meeting, according to regulatory filings.
Blackwells wants to acquire Monmouth, sell its money-losing REIT securities portfolio and shrink the size of its board. It would then like to grow the firm’s industrial real estate footprint from roughly 24 million square feet today to 100 million square feet in the next three years, the people said.
An alternative investment management firm, Blackwells was founded in 2016 by Jason Aintabi, its chief investment offer. The transaction would be the first for Blackwells. The firm has lined up a combination of equity and debt to finance the transaction, the people said.
Prior to its investment in Monmouth, Blackwells has agitated for changes at Tom Barrack’sColony Capital Inc., which resulted in the sale of its industrial warehouse portfolio to theBlackstone Group Inc. for $5.7 billion last year. Blackwells has also pushed for changes at Colony Credit Real Estate Inc., as well as at grocer, Supervalu Inc., before it was sold to United Natural Foods Inc. in 2018.
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