Equity Commonwealth Sweetens Monmouth Merger Offer

Equity Commonwealth and Monmouth Real Estate Investment Corp. have amended their merger agreement, the companies announced Monday. As originally proposed in May, the deal was to have been an all-stock transaction, with Monmouth shares valued at about $19.40 per share.

Now, however, EQC has revised its offer to pay a total value of $19.00 per share in a combination of cash and stock at the election of Monmouth shareholders and based on EQC’s closing price of $26.65 per share on Aug. 13.

Total consideration for the transaction remains about $3.4 billion, including the assumption of $857 million of mortgage debt and repayment of the $550 million of Monmouth’s 6.125 percent Series C Redeemable Preferred Stock and Monmouth’s outstanding line of credit and term loan.

“The new cash component provides greater certainty of value and an opportunity for liquidity for Monmouth’s shareholders,” according to a prepared statement. The amended offer increases the exchange ratio from 0.67 shares of EQC stock for every share of Monmouth stock to 0.713.

“Our revised offer provides Monmouth shareholders with the option to elect to receive consideration in cash, but also provides a tax-deferred option to remain invested in the future upside of our business,” said David Helfand, EQC president, CEO and trustee. “We will continue to have significant balance sheet capacity, of over $4 billion, for future industrial investments.”

Both companies’ boards have recommended approval of the merger by shareholders.

Helfand will continue to lead the company, but the number of trustees on EQC’s board will increase to 10, two of them designated by Monmouth. Sam Zell will remain EQC’s chairman of the board.

EQC and Monmouth shareholders are expected to own about 73 percent and 27 percent, respectively, of the pro forma company after the merger closes. That’s in comparison with an approximately 65-35 split as originally estimated.

Multiple suitors

Monmouth is one of the world’s oldest public equity REITs and specializes in single-tenant, net-leased industrial properties subject to long-term leases, primarily to investment-grade tenants. Its portfolio includes 120 properties totaling 24.5 million square feet, across 31 states. Most of the facilities are Class A buildings near airports, seaports or transportation hubs.

In July, Monmouth received an unsolicited acquisition offer from a large private equity firm, reported to be Starwood Capital Group.

Last December, prior to the EQC bid, Blackwells Capital LLC made an offer to buy Monmouth for $18.00 per share in an all-cash deal. Complications arose, however, and Blackwells called for a review of the offer by a special committee of the Monmouth board, one excluding members of the Landy family. The offer was later rejected.