Blackwells Capital LLC (together with its affiliates
“Blackwells”), an alternative investment management firm that is
one of the largest owners of Monmouth Real Estate Investment
Corporation (NYSE: MNR) (“Monmouth” or the “Company”), announced
today that on December 18, 2020, it submitted an offer letter to
the Company’s Board of Directors (the “Board”) outlining an
all-cash offer to acquire Monmouth for $18.00 per share.
Blackwells’ offer represents a 21.6% premium to the unaffected
share price as of December 1, 2020 (at which time Blackwells
privately submitted its first all-cash offer to the Chairman of the
Board, Eugene Landy), and exceeds the unaffected three-month and
six-month VWAPs by 23.8% and 24.8%, respectively. The all-cash
transaction is valued at approximately $3.8 billion, including the
assumption of debt.
Jason Aintabi, Chief Investment Officer of Blackwells, said, “As
a public company, Monmouth has significantly underperformed
comparable industrial REITs over the last five years, further
exacerbated by the stock’s lack of liquidity. Blackwells’ cash
offer provides shareholders immediate liquidity at a 17% premium
above consensus net asset value – though the stock has long traded
at a discount to it. Our offer also represents a premium to
unaffected price well above the average premium for completed REIT
deals over the last five years.”
Added Aintabi, “After we privately made our first offer on
December 1, I had a constructive dialog with the Company’s CEO
Michael Landy, who expressed enthusiasm and a desire to engage.
Soon thereafter, we received a puzzling follow-up letter from
Michael’s father, Chairman Eugene Landy, indicating that on second
thought Monmouth would not engage with us, because exploring our
offer would ‘not be in the best interests of the company.’ For
myriad and tangible reasons, Monmouth in its current state, does
not belong in the public markets. Pursuing our offer is the best
way to maximize value for all Monmouth shareholders.”
Blackwells believes that a Special Committee of the Board,
excluding Landy family members, Landy family affiliates, and those
directors affiliated with UMH Properties, Inc., should be formed to
objectively review the new Blackwells offer.
Blackwells is now making its offer public, to ensure all
Monmouth shareholders have equal access to this information, in
light of unusual trading volumes and share price dynamics since the
submission of our first offer privately to the Company.
The full text of the offer letter follows:
December 18, 2020
Mr. Eugene W. LandyChairman of the Board and Executive
DirectorMonmouth Real Estate Investment Corp.401 Crawfords
CornerSuite 1405Holmdel, NJ 07733
RE: Proposal for Acquisition of Monmouth
Dear Mr. Landy:
It is my pleasure on behalf of Blackwells Capital LLC
(“Blackwells” or “we”) to submit this preliminary proposal for the
negotiated acquisition of Monmouth Real Estate Investment
Corporation (the “Company” or “you”) by Blackwells (the
“Transaction”). Blackwells has made a substantial investment in the
common stock of the Company and is one of the Company’s largest
shareholders.
Blackwells proposes to acquire 100% of the outstanding equity
interests in the Company for $18.00 per share of common stock, par
value $0.01 per share, in cash, subject to the terms set forth
below (the “Proposal”). The Transaction will provide your
stockholders with a substantial premium to recent trading prices of
the stock and an attractive value for their shares. Our Proposal
provides stockholders with compelling value, low execution risk and
a quick timeline to closing.
Blackwells is a leading global alternative asset manager,
founded in 2016 by Jason Aintabi, its Chief Investment Officer.
Blackwells has an extensive background in real estate, with
existing public and private investments in similar assets to the
Company. Throughout their careers, Blackwells’ principals have
invested globally on behalf of leading public and private equity
firms and have held operating roles and served on the boards of
media, energy, technology, insurance and real estate
enterprises.
Blackwells looks forward to working collaboratively with the
Company’s Board of Directors to finalize our Proposal. Having
analyzed publicly available information about the Company
comprehensively, we believe you have an attractive portfolio of
high-quality properties, demonstrated portfolio and NOI growth, and
conservative expense management. We have a tremendous amount of
respect for the Company’s history, and the amount of diligent
effort and foresight the Landy family has employed in achieving the
Company’s success to date.
Proposal
Value: Blackwells proposes an
all-cash acquisition of 100% of the outstanding shares of the
Company for $18.00 per share of common stock, par value $0.01 per
share, reflecting a 21.6% premium to the unaffected market price of
$14.80 prior to our offer and premiums to the then 52-week high
($15.53) and 52-week low ($8.42) of 15.9% and 113.8%, respectively.
Notably, the proposed price exceeds the unaffected 1-month,
3-month, and 6-month VWAPs by 19.3%, 23.8%, and 24.8%,
respectively1.
Financing: We would expect to finance the
Transaction with a combination of debt and equity. Blackwells’
internal resources, as well as certain limited partner commitments,
conditioned on completion of satisfactory diligence investigations,
will fund the equity portion of the Transaction. We have engaged
[REDACTED] to arrange the debt financing of the Proposal; its
highly confident letter is attached as Appendix I to this
letter.
Below please find our expected sources and uses to finance the
Transaction:
($ in millions)
Sources &
Uses2 |
|
|
|
|
Uses of Funds |
$ |
% |
Purchase of Equity
|
[REDACTED] |
[REDACTED] |
Committed Acquisitions
|
|
|
Refinanced
Debt |
|
|
Refinanced Preferred
|
|
|
Mortgage Defeasance Costs
|
|
|
Debt Financing Expenses
|
|
|
Management Change of Control
|
|
|
Advisory
Expenses |
|
|
Total |
$3,780 |
100.0% |
|
Sources of Funds |
$ |
% |
Sponsor Equity
|
[REDACTED] |
[REDACTED] |
New
Debt |
|
|
Cash from Balance
Sheet |
|
|
Total |
$3,780 |
100.0% |
|
Due Diligence: The Proposal is
subject to our completion of standard confirmatory diligence. Given
our industry experience and the substantial preparatory work we
have done, we can proceed expeditiously with the requisite due
diligence and simultaneously negotiate a definitive agreement. Our
work would include customary property-level diligence, financial
diligence, and confirmatory legal, accounting and tax reviews. We
have engaged [REDACTED] as our legal advisor in connection with the
Proposal and are prepared to enter into a confidentiality agreement
with you to facilitate these reviews. Given our and our advisors’
experience with transactions of this type, we expect to be able to
complete the required due diligence and enter into definitive
documentation within 45 days. A preliminary copy of our due
diligence request list is attached as Appendix II to this letter.
We are eager to commence work, and our team is available
immediately.
Closing Conditions: The
consummation of the Transaction will be subject to limited
customary closing conditions for a public company transaction of
this nature.
Exclusivity: We propose to
enter into exclusive bilateral negotiations with you and work
expeditiously to sign and announce the Transaction. We would expect
the Transaction to provide for a customary “Go-Shop” period. A copy
of our proposed exclusivity agreement is attached as Appendix III
to this letter.
Reviews and Approvals: This
letter has been reviewed and approved by our investment
committee.
Management and Founders: We
are impressed with the management team and prior to executing a
definitive agreement, we would expect customary access to
management to discuss their continuing roles. We are also happy, at
the appropriate time, to discuss the Landy family’s goals and
desires for future involvement with the Company, including
continuing participation in the equity ownership of the
Company.
This letter does not constitute a binding obligation or
commitment of either party or its affiliates to proceed with any
transaction. No such obligations will be imposed on either party or
its affiliates unless and until a mutually acceptable definitive
agreement is formally entered into by both parties.
We look forward to working collaboratively with the Board and
its advisors to advance our Proposal. Please contact me at your
earliest convenience to discuss next steps.
Sincerely,
/s/
Jason Aintabi
Appendix I
[FINANCIAL INSTITUTION ADDRESS]
12/01/2020
Blackwells Asset Management LLC
800 Third Avenue, 39th FloorNY, NY 10022
Attention:Mr. Jason AintabiChief Investment Officer
Re: Acquisition Financing – Highly Confident Letter Ladies and
Gentlemen:
You have informed [REDACTED] (“[REDACTED]”) that you are
presently considering a transaction pursuant to which you and/or
one or more of your affiliates (collectively, the “Sponsor”) would
(i) acquire (the “Acquisition”), through a newly-formed corporation
(“Newco”) wholly-owned by the Sponsor and other equity investors
reasonably acceptable to [REDACTED] (collectively with the Sponsor,
the “Equity Investors”), all or substantially all of the
outstanding equity interests of, or all or substantially all of the
business (including, without limitation, all assets, licenses and
related operations) of, a company identified to us and code- named
“[REDACTED]” (together with its subsidiaries, the “Acquired
Business”) and (ii) refinance substantially all of the existing
indebtedness of the Acquired Business and pay any and all accrued
and unpaid interest and call premiums thereon (the “Refinancing”).
We understand that the Acquired Business shall be acquired free of
indebtedness and preferred stock, with such exceptions (if any) for
any existing indebtedness as may be agreed to by [REDACTED].
[REDACTED] further understands that the sources of funds needed
to effect the Acquisition and the Refinancing, to pay all fees and
expenses incurred in connection with the Transaction (as defined
below) and to provide for the working capital needs and general
corporate purposes of Newco and its subsidiaries after giving
effect to the Transaction shall be provided through:
(i) a cash common equity financing to be provided by the Equity
Investors in an aggregate amount of not less than approximately 25%
of the pro forma total consolidated capitalization of Newco and its
subsidiaries after giving effect to the Transaction (the “Equity
Financing”); and
(ii) third-party debt financing consisting of mortgage secured
notes (the “Senior Mortgage Debt”) to be issued by Newco (either
pursuant to a bridge financing or by private placement; all or a
portion of the Senior Mortgage Debt may be in the form of an CMBS
execution, and may include a mezzanine debt portion secured by
equity pledges) in an aggregate principal amount of $2,640 million
(the “Senior Acquisition Financing”)
The Acquisition, the Refinancing, the Equity Financing and the
Senior Acquisition Financing collectively are herein called the
“Transaction”.
[REDACTED] is pleased to inform you that, based on our
preliminary review of certain financial information and projections
provided by you to us, our understanding of the Transaction as
described above and current market conditions and subject to the
satisfaction of all conditions outlined below, we are highly
confident in our ability to arrange and/or place the Senior
Acquisition Financing (directly and/or through one or more of our
affiliates) to finance, in part, the Transaction.
You understand and agree that our confidence in our ability to
arrange and/or place the Senior Acquisition Financing is subject
to, among other things, (i) there not having occurred any material
adverse change in the condition (financial or otherwise), results
of operations, business, assets, property, liabilities or prospects
of the Acquired Business since the date of the most recent audited
financial statements available on the date hereof for the Acquired
Business, (ii) the terms and structure of the Senior Acquisition
Financing and the Equity Financing being acceptable to [REDACTED],
(iii) the negotiation, execution and delivery of documentation for
each component of the Transaction and related transactions in form
and substance satisfactory to [REDACTED], (iv) [REDACTED]’s and its
representatives’ completion of and satisfaction with the results of
their business and legal due diligence with respect to the Acquired
Business and the Transaction, including, but not limited to,
proposed business plans and projections and financial, accounting,
environmental, tax, litigation, labor and pension matters, (v) the
availability of audited and unaudited historical financial
statements of the Acquired Business and pro forma financial
statements of Newco and its subsidiaries after giving effect to the
Transaction, in each case reasonably acceptable to [REDACTED] and
in form and presentation as required by the Securities Act of 1933,
as amended, and the rules and regulations thereunder applicable to
registration statements filed thereunder, (vi) there not having
been any disruption or material adverse change in the syndication
market for credit facilities or the financial or capital markets in
general, in the judgment of [REDACTED], (vii) [REDACTED] having
been engaged to and having a reasonable time to arrange and market
the Senior Acquisition Financing based on [REDACTED]’s experience
in comparable transactions, (viii) satisfaction of all other
conditions [REDACTED] would require to be fulfilled with respect to
the Senior Acquisition Financing, and (ix) there is sufficient real
estate collateral value that is free and clear of existing
encumbrances and / or liens that would prevent the perfection of a
mortgage security interest by the Senior Acquisition Financing.
You understand and agree that (i) we assume no responsibility
for independently verifying any information provided to us in
connection with our evaluation of the Transaction and that we have
relied upon such information being complete and accurate in all
material respects, (ii) this letter does not constitute a
commitment on the part of, or engagement of, [REDACTED] or any of
its affiliates to provide, arrange, place, underwrite and/or
participate in any or all of the Senior Acquisition Financing or
any other financing, on the terms described herein or otherwise,
and that neither [REDACTED] nor any of its affiliates are under any
obligation, as a result of this letter or otherwise, to provide or
offer to provide any such commitment or engagement and (iii)
[REDACTED] cannot make any commitments on behalf of any of its
affiliates. Any commitment or engagement by [REDACTED] or any of
its affiliates, if forthcoming, in respect of the Senior
Acquisition Financing or any other financing would be evidenced by
a separate written agreement executed by [REDACTED] (or a
designated affiliate thereof) and would be subject to, among other
things, (x) [REDACTED]’s and its representatives’ completion of and
satisfaction with the results of their business and legal due
diligence as outlined above, (y) [REDACTED]’s receipt of all
credit, business selection, conflicts and other internal approvals
of [REDACTED] and its relevant affiliates and our verification of
all assumptions we have made and (z) the satisfaction of all
conditions we would require to be fulfilled with respect
thereto.
None of [REDACTED], any of its affiliates or any of their
respective directors, officers, employees, representatives and
agents shall be responsible or liable to you or any other person or
entity for any damages or amounts of any kind or character which
may be alleged as a result of this letter or the proposed
Transaction, or any other transactions contemplated hereby. This
letter is not intended to confer any benefits upon, or create any
rights in favor of, any person or entity and may not be relied upon
by any person or entity.
You acknowledge that (i) [REDACTED] may share with any of its
affiliates, and such affiliates may share with [REDACTED], any
information (including as relating to creditworthiness) related to
the Transaction, the Sponsor, Newco or the Acquired Business (and
each of their respective subsidiaries and affiliates), or any of
the matters contemplated hereby and (ii) [REDACTED] and its
affiliates may be providing debt financing, equity capital or other
services (including financial advisory services) to other companies
in respect of which you or the Acquired Business may have
conflicting interests regarding the transactions described herein
and otherwise. [REDACTED] agrees to treat, and cause any such
affiliate to treat, all non-public information provided to it by
you and the Acquired Business as confidential information in
accordance with customary banking industry practices.
You agree that this letter is for your confidential use only and
that, unless [REDACTED] has otherwise consented in writing, neither
its existence nor the terms hereof will be disclosed by you to any
person or entity other than (x) your officers, directors,
employees, accountants, attorneys and other advisors and (y) the
Acquired Business and its officers, directors, shareholders,
employees, accountants, attorneys and other advisors, and then (in
either case) only on a “need to know” basis in connection with the
transactions contemplated hereby and on a confidential basis.
Notwithstanding the foregoing, (i) you may file a copy of this
letter in any public record in which it is required by law, in the
opinion of your counsel, to be filed, and (ii) you may make such
other public disclosure of the terms and conditions hereof as, and
to the extent, you are required by law, in the opinion of your
counsel, to make; provided that, in any such case, you shall
provide written notification to [REDACTED] in advance of such
disclosure.
We look forward to working with you to complete the proposed
Transaction successfully.
Very truly yours,[REDACTED]
About Blackwells Capital
Blackwells Capital was founded in 2016 by Jason Aintabi, its
Chief Investment Officer. Since that time, it has made investments
in public securities, engaging with management and boards, both
publicly and privately, to help unlock value for stakeholders,
including shareholders, employees and communities. Throughout their
careers, Blackwells’ principals have invested globally on behalf of
leading public and private equity firms and have held operating
roles and served on the boards of media, energy, technology,
insurance and real estate enterprises. For more information, please
visit www.blackwellscap.com
Contact:Gagnier CommunicationsDan Gagnier /
Jeffrey Mathews 646-569-5897Blackwells@gagnierfc.com
1 Market data as of 12/1/2020.2 Balance sheet data as of
9/30/2020. Pro forma for issuance of 1.4 million units of Series C
Preferred Stock.
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