Sizeler Property Investors
signed a definitive agreement to sell itself for $324 million, but the transaction's fate is uncertain, since two large activist hedge funds have already said they will not accept the deal.
Sizeler, a real estate investment trust that owns retail and apartment properties in the Southeast U.S., said Monday it agreed to be acquired by Canadian real estate company Revenue Properties for $15.10 a share in cash.
Sizeler had already announced a letter of intent for the merger in early August. Shortly after, hedge fund Mercury Real Estate Advisors blasted the company, saying it was "outraged" at the sale price.
Mercury, which owns 1.9 million shares, or 8.9%, of Sizeler, was partly annoyed because the merger price was a 6.5% discount to the company's July 31 52-week high and a 2% discount from the closing price on the day prior to the announcement.
But Mercury also was peeved because the buyer is a close affiliate of Mark Tanz, Sizeler's chairman.
"Mr. Tanz is the former controlling shareholder of Revenue Properties, a current shareholder of Revenue Properties, and was until very recently a member of the Board of Directors of Revenue Properties," Mercury CEO David Jarvis wrote in a letter to Sizeler's board, which was filed with the
Securities and Exchange Commission
"Most egregious is the fact that the company is clearly worth significantly more than $15.10 per share. To sell the company for this price to an affiliate of Mr. Tanz raises serious concerns about conflicts of interest and the fiduciary duties owed to the shareholders of Sizeler," Jarvis said.
Last week, fellow hedge fund Bulldog Investors, led by Phillip Goldstein, also said it disapproved of the sale. Bulldog owns 1.4 million shares, or 6.6% of Sizeler.
We have spoken with other shareholders that agree with us that the liquidation value of Sizeler's real estate portfolio is significantly higher than $15.10 per share," Goldstein wrote.
"We cannot passively accept the situation. Therefore, we intend to solicit proxies to oppose the proposed transaction and to propose an orderly liquidation of Sizeler as the best way to maximize shareholder value for all shareholders, not just Revenue Properties. In addition, we are seriously contemplating making an offer for Sizeler in excess of $15.10 and filing alawsuit to prevent the proposed transaction from being consummated."
In its press release Monday, Sizeler defended the sale price.
"The merger agreement is the result of a seven-month process during which Sizeler considered its strategic alternatives and canvassed a large number of potential bidders. The proposed transaction represents the best alternative available to Sizeler and its stockholders as a result of that process," Sizeler said.
Wachovia Securities acted as financial adviser to Sizeler. Cohen & Steers rendered an opinion to the Sizeler board that the transaction is fair, from a financial point of view, to Sizeler's stockholders, the company said.
Sizeler shares recently traded at $14.79, up 10 cents.