Merger activity decreased last week with three new deals announced and two deals completed. Unlike the previous month, there were no banking-related mergers announced last week but we did see yet another deal receive a higher offer.
Holmdel-based Monmouth Real Estate Investment Corporation (MNR) is one of the oldest public equity REITs in the world. Founded in 1968, the company owns 120 properties totaling 24.5 million square feet in its portfolio and is under contract to purchase six properties totaling 1.8 million square feet.
We added MNR as a potential deal in the works on December 21, 2020, when Blackwells Capital, one of the largest owners of Monmouth Real Estate Investment Corporation offered to acquire Monmouth for $18 per share. The following month, on January 14, 2021, the company announced that its Board of Directors had determined that Blackwell’s offer was not in the best interest of the Company and that it was exploring strategic alternatives to maximize stockholder value, including a potential sale or merger of the company. As a result of this consideration, the Board suspended the Company’s Dividend Reinvestment and Stock Purchase Plan and stated that stockholders would receive dividends in cash effective with the dividend that was scheduled to be paid on March 15, 2021. Stockholders that remained enrolled at reinstatement would automatically resume participation in the Plan.
On May 4, 2021, Equity Commonwealth (EQC), a Chicago-based office REIT, and Monmouth entered into a definitive merger agreement by which Equity Commonwealth will acquire Monmouth in an all-stock transaction, valued at approximately $3.4 billion, including the assumption of debt. The merger agreement also includes one remaining dividend of 18 cents per share.
At announcement, the deal with EQC was worth $19.44 per share but following a big drop in EQC’s stock price after the deal announcement, the deal is currently only worth $18.72 per share, not significantly above Blackwells’ offer. What is even more interesting is that with MNR trading at $19.49, the deal has a negative spread of 3.96% indicating arbitrageurs are expecting another bidding war.