NEW YORK (The Deal) -- CommonWealth REIT (CWH) won what could be a short-lived victory in its battle against activists trying to oust its board as an arbitration panel ruled the initial effort was invalid, but determined a new campaign could proceed.
The Newton, Mass.-based REIT has been battling investors Corvex Management and Related Fund Management, which together own about 9.6% of CommonWealth's shares, over a plan by the investors to overhaul CommonWealth's relationship with its external management company and improve corporate governance.
The two investors in April kicked off a campaign to remove CommonWealth's board of trustees, claiming in June that they had support of more than 70% of shares. But CommonWealth countered that the campaign was invalid under its bylaws.
An arbitration panel chaired by California-based attorney Henry J. Silberberg ruled that the consent solicitation initiated by the investors "was not properly conducted and cannot be validated," according to CommonWealth.
But the investors in a separate statement noted that the panel said CommonWealth's bylaws "erect a complex wall of procedural hurdles," and said that Corvex and Related can start a new effort under guidelines established by the panel. Among the rules the panel criticized was a bylaw adopted in March that required a shareholder to own at least 3% of the company for a minimum of three years before launching an effort to overhaul the board.
Both sides hailed the ruling as a victory. Adam Portnoy, managing trustee and president of CommonWealth, said the board was "pleased" by the ruling and that the company would continue to execute on its plan.