Published On: Tue, Mar 25th, 2014

CommonWealth REIT Confirms Ouster of Board By Dissident Shareholder Group

 

Jeff-Blau-Keith-Meister-Sam Zell -Adam-Portnoy

 (L-R) Jeff-Blau-Keith-Meister-Sam Zell -Adam-Portnoy

The commercial office real estate investment trust CommonWealth REIT, which is listed on the New York Stock exchange and based in Merton Massachusetts, a suburb of Boston, confirmed today the removal of its entire Board of Trustees in a proxy consent solicitation.

This is the culmination of a battle begun a year ago, when Keith Meister’s activist hedge fund Corvex Capital teamed up with Related Management, an affiliate of real estate development company The Related Companies, led by Related’s CEO Jeff Blau to oust the CommonWealth management which is led by father and son team Barrie and Adam Portnoy.

Just one week ago, at their second successful attempt (the first was disallowed on procedural grounds), Corvex and Related announced they had received an 81% vote in favour of removing the REIT’s Board of Trustees in a proxy consent solicitation, the required threshold for which was 66.7%.

In canvassing for the vote, Corvex and Related had enlisted real estate billionaire Sam Zell to serve as Chairman of a reconstituted Board of Trustees if they should prevail, as well as his sidekick David Helfand who would become CEO and run the place. With longstanding track records of success the proposed new team may have played a significant role in pushing the number of votes for a change over the threshold required.

After Corvex and Related announced their own calculation of the vote, this gave CommonWealth one week, until today March 25th, 2014, to professionally count and certify the result which they have now done and confirmed.

But that is not yet the end of the matter as the Portnoys now have up to 60 days to hold a special shareholders meeting to vote for a new Board of Trustees. In doing so, until today the administrative question then has obviously been how would this be done? Would the Corvex and Related slate of five proposed new Trustees simply be accepted by the Portnoys by default? Or could they try to resist and, de novo, propose a completely new slate of their own to prolong the battle further?

Well, all is indeed now reasonably clear; in their very carefully drafted announcement today, CommonWealth first acknowledges the 81% vote and that it exceeds the threshold for change of all its presently existing Trustees, without cause.

Second, CommonWealth agrees to promptly call a special meeting of shareholders for the purpose of electing new Trustees to its Board of Trustees.

Third, CommonWealth will file a preliminary information statement with the Securities and Exchange Commission within one week, as required by securities laws.

Fourth, subject to reasonably prompt SEC review CommonWealth then expects to hold the special shareholders meeting itself on, or before, May 23rd, 2014.

Fifth, the time, date, place and record date for such meeting will become defined upon filing definitive materials with the SEC after their review and any required changes have been made.

Sixth, CommonWealth confirms that the period for shareholders to nominate individuals for election as new Trustees is now open to shareholders who have owned at least US$2, 000 of its shares for at least one year. The deadline for such nominations will be ten days after the definitive date for the meeting itself is determined and announced.

After that it will then be up to the shareholders to vote at the meeting. Clearly Corvex and Related will nominate their slate and, one can well imagine, the Portnoys will quite possibly do the same. Given the way the votes went for the consent solicitation, however, one can infer quite easily who will win.

Accordingly, therefore, unless there are more procedural hurdles to be thrown in the way by the Portnoys, at this point one can guardedly predict that it is finally game over for them, after what has been a marathon rear-guard action against corporate change.

However, as they used to say in vaudeville, it ain’t over until the fat lady stops singing. So let’s wait and see.

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