This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

The Deal: CommonWealth Swallows Poison Pill

NEW YORK (TheStreet) -- CommonWealth REIT (CWH) on Monday, Sept. 23, pledged to revamp its board, scrap its poison pill and change the way its management company is paid in an attempt to resolve an ongoing dispute with dissident shareholders.

Newton, Mass.-based CommonWealth said that beginning next year business management fees paid to REIT Management & Research would be paid in CommonWealth shares instead of cash. The REIT also intends to tie RMR annual incentive payments to total returns on shares instead of being tied to funds from operations.

CommonWealth also said it intends to increase the size of its board from five and increase the number of independent trustees from 60% of the board to at least 75%. CommonWealth said its board has retained Korn/Ferry International to seek out potential independent trustees.

The announcements follow a campaign by investors Corvex Management and Related Fund Management LLC, who together own about 9.6% of CommonWealth's shares, to overhaul CommonWealth's relationship with its external management company and improve corporate governance.

Chief among the activists' complaint was that because CommonWealth and RMR had interlocking management and corporate boards decisions about the real estate portfolio were made to keep RMR property management fees up, rather than selling off property or making other changes that might benefit the REIT.

Disputes between CommonWealth and the investors are in arbitration. The dissidents last month notched a small victory when the arbitration panel struck down a provision that would make replacing CommonWealth's board more difficult. Arbitration hearings on other related matters are scheduled to begin on Oct. 7.

The investors had no immediate response to CommonWealth's changes, but the REIT said the new policies follow several weeks of "numerous conversations with shareholders" about the way it operates.

But Corvex and Related in a statement said the reforms "lack substance and constitute mere window dressing" by the board. "Shareholders should note that these "to-be proposed" governance changes contain widespread caveats and would not even be considered, if ever, until after the arbitration is expected to be completed," the investors said, adding that they "remain confident" they will be successful in arbitration.

"A persistent theme of our recent conversations with shareholders has been that [CommonWealth] should further align RMR's financial incentives with the returns realized by shareholders and enhance its governance," CommonWealth's independent trustees said in a statement. "The changes announced today are intended to address these concerns, while allowing CWH shareholders to continue receiving high-quality management services at or below average costs."

CommonWealth said its board is also recommending that once the shareholder dispute is resolved all trustees be subject to annual re-election instead of staggered three-year terms. The board also said it would accelerate the expiration of CommonWealth's shareholder rights plan, or so-called poison pill, from Oct. 17, 2014, to a date soon after resolution of the disputes with Corvex and Related.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,678.13 -202.23 -1.20%
S&P 500 1,938.71 -31.36 -1.59%
NASDAQ 4,382.49 -80.4120 -1.80%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs