A pair of major shareholders have this month come out against the planned $4.8B deal to break up H&R REIT. That's enough to make a vote interesting.
Management at RBC Global Asset Management, which holds 9.3 million units in H&R, told Bloomberg earlier this month that the firm plans to vote against the deal. The disclosure came a day after leadership at Mill Pond Capital, which has 2.2 million units, also said it would vote to reject the transaction.
I read the opposition as a question of trust: shareholders are being asked to accept a price far below what the company itself says the assets are worth.
The remaining 20.5M SF portfolio has a fair-market value of $6.5B, H&R estimates, while the company's public market capitalization is around $1.8B. Shareholders are set to receive a 14.5% premium over H&R's closing price on June 10, when Blackstone's early-stage talks were first reported, if they approve the deal.
Mill Pond published a five-point letter outlining its issues with the deal, chief among them an allegation that the proposed structure benefited CEO Tom Hofstedter at the expense of shareholders.
An entity connected to the Hofstedter family is set to acquire H&R's remaining noncore assets. The REIT is holding a special meeting on Nov. 13 to vote on the breakup.
I'd watch whether other shareholders echo the dissent, or whether the premium is enough to carry the vote.