Mack-Cali Realty Corp. disclosed that it received and rejected an unsolicited proposal from investment manager Bow Street and David Werner Real Estate Investments to acquire its suburban and waterfront office assets in a deal that would see Mack-Cali's other residential assets spun off to shareholders as a new publicly traded real estate investment trust.
The proposal was received Feb. 25, and the office and multifamily landlord's board agreed to consider it at its quarterly meeting March 13.
Bow Street also informed the company March 10 that it intends to nominate a slate of candidates to Mack-Cali's board before the March 15 deadline for submitting director nominations. On March 14, Bow Street Special Opportunities Fund XV LP delivered a notification for the nomination of a majority slate of six candidates at Mack-Cali's annual meeting of stockholders.
Following an evaluation of the offer in consultation with its financial and legal advisers, Mack-Cali's board unanimously determined that the proposal undervalues the company's portfolio and overstates the net cash proceeds that would be available to stockholders.
The proposal implied a transaction value of $26 to $29 per share and valued the company's suburban and waterfront office assets at between $2.4 billion and $2.6 billion, which the company noted was significantly lower than management's valuation. Implied net proceeds to stockholders from the sale of the portfolio were estimated at between $8 and $10 per share but did not account for taxes, frictional costs and structuring prohibitions.
Mack-Cali also said the resulting REIT entity from the proposal would be "a small, undercapitalized company unlikely to achieve an attractive valuation in the public market."
According to Mack-Cali's board, the proposal could result in an overall value lower than the company's current trading price.
Mack-Cali said shareholders are not required to take any action at present, and it is evaluating Bow Street's director nomination notice for compliance with company bylaws.
BofA Merrill Lynch is serving as financial adviser to Mack-Cali, and Greenberg Traurig LLP and Seyfarth Shaw LLP are serving as legal counsel.