First Potomac Realty Trust, now engaged in a merger deal with Government Properties Income Trust, was approached by three suitors seeking to buy the company between March 2016 and December 2016.
Additionally, in May 2017, First Potomac received 10 nonbinding indications of interest for a potential company-level transaction.
The three offers in 2016 came from a joint venture between a China-based private equity outfit and a U.S. private investment firm; a jointly owned U.S. real estate private equity firm alongside a China-based real estate developer; and a partnership involving a value-oriented investment manager and its co-investor, in that order, according to a filing. All the parties were unnamed.
The offers landed after the company unveiled for investors, in February 2016, a strategic business plan designed to reduce risk in its portfolio, de-lever its balance sheet and maximize its assets' value.
The private China-U.S. joint venture came forward with a nonbinding indication of interest in March of that year, before submitting in May a revised, nonbinding indication of interest to acquire the whole company for a cash offer of $10.50 per share — an amount "significantly below" the purchase price range proposed in the original indication of interest, according to the filing. The board declined to consider the offer further.
Also in May 2016, First Potomac fielded an unsolicited letter of interest to acquire the company, with no specific price or terms, from a U.S.-based jointly owned real estate private equity firm alongside a China-based real estate developer. In June, the party submitted a revised, nonbinding indication of interest, without indicating the transaction's structure or financing sources, to buy the company for $10.50 per share. The board rejected the offer on grounds that the letter lacked "meaningful detail" and did not represent a "compelling" opportunity.
And in October 2016, First Potomac fielded an unsolicited, nonbinding indication of interest from a partnership that involved a value-oriented investment manager and its co-investor with a potential acquisition price range of $11.00 to $12.00 per share. Discussions continued through January 2017, but the interested party ultimately failed to submit a more detailed proposal following due diligence.
First Potomac, in December 2016, also received from a joint venture sponsored by a private equity firm a verbal communication of interest in a potential transaction, but the conversation did not manifest in a written indication of interest.
Between May 10 and May 12 of this year, First Potomac received 10 nonbinding indications of interest, including four in writing and six communicated verbally, for a potential company-level transaction. The written offers proposed cash offer price ranges as high as $11.00 to $11.25 per share. Additionally, the company received in that time frame two oral indications of interest in specific assets and one written indication of interest for a structured asset contribution deal.
Government Properties, the ultimate buyer, submitted in a letter dated June 13 a proposal to buy the whole company for a cash offer price of $11.15 per share.
The same day, the private-equity-sponsored joint venture that had expressed interest in December 2016 set forth an acquisition proposal at $11.15 per share, with the caveat that it would need more time to conduct due diligence. On June 21, the JV made a proposal to buy the company for $11.25 per share, but the letter did not indicate specific timing for a definitive deal. The JV approached the company again on July 25 with a revised offer of $11.40 per share.
Ultimately, First Potomac determined that Government Properties' "more certain" proposal was preferable despite the difference in price with the JV's offer, and on June 27 executed the merger agreement with the REIT.