Corvex and Related team up to take on CommonWealth, and it is getting messy.
When we last checked in on Corvex Management (run by a former Icahn protégé), it was busy creating some shareholder value at Corrections Corporation of America and advocating a REIT conversion.
Now, Corvex has teamed up with Related Fund Management, LLC, demanding that CommonWealth REIT (CWH) (i) immediately cease its proposed equity offering and debt repurchase, and (ii) enter into discussions with Corvex and Related regarding maximizing long-term value.
Corvex and Related also noted that they would initially be prepared to acquire all the outstanding shares of CommonWealth at a price of $25.00 per share (then a 58% premium), with the opportunity to increase the offer after completing due diligence. CWH closed at $22.51 at the time of this writing.
In addition, Corvex and Related filed a complaint against CommonWealth and its Board of Trustees alleging, among other things, breach of fiduciary duties and asking the court to enjoin CommonWealth and its trustees from taking actions to implement the proposed equity offering; rescind the equity offering should it be completed; and enjoin CommonWealth and its trustees from taking further actions in violation of their fiduciary duties.
The spread between the trading price and preliminary offer price shows some pessimism on the part of investors that a deal would take place. We can’t imagine that the CommonWealth trustees are particularly keen on working with Corvex and Related after the complaint. However, well-funded and motivated activist shareholders with a track record of getting shareholder value should not be overlooked too quickly.