CommonWealth REIT continues tender offer despite Corvex objections

By Susanna Moon

Chicago, Feb. 27 - CommonWealth REIT said it has decided to continue the cash tender offer for up to $450 million of four series of notes issued by HRPT Properties Trust, which was the name of the company at issuance.

CommonWealth said its board of trustees determined that continuing the tender offer would serve the trust's best interests.

The board's decision was made after considering the schedule 13D jointly filed on Feb. 26 by Corvex Management LP and Related Fund Management, LLC with the Securities and Exchange Commission and a separate open letter, according to a press release by CommonWealth.

Corvex counteroffer, complaint

Corvex and Related are demanding that "the issuer immediately cease its proposed equity offering and debt repurchase, and enter into discussions with Corvex and Related regarding maximizing long-term value for all of the issuer's shareholders," according to the SEC filing.

Corvex and Related also noted that they would initially be prepared to acquire all of the issuer's outstanding shares at a price of $25.00 per share, which is a 58% premium to the closing price of $15.85 per share on Feb. 25.

The company also said there was an "opportunity to meaningfully increase this proposed offer after completing due diligence."

"If the issuer proceeded with the proposed equity offering, however, their proposed valuation would be significantly negatively impacted," the filing noted.

Corvex and Related said they will file a complaint on Feb. 27 to enjoin CommonWealth from implementing or completing the proposed equity offering.

The complaint alleges that CommonWealth's trustees have breached their fiduciary duties to shareholders, the filing added.

CommonWealth tender offer

CommonWealth REIT announced the cash tender offer on Feb. 25.

As noted before, pricing for the notes, listed in order of priority acceptance level, will be set at 2 p.m. ET on March 11 using the bid-side price of a reference security plus a fixed spread as follows:

• $244,655,000 5.75% senior notes due Feb. 15, 2014 will be based on the 0.75% Treasury note due Aug. 15, 2013 plus a spread of 50 basis points;

• $186 million 6.4% senior notes due Feb. 15, 2015 will be based on the 0.25% Treasury note due Jan. 31, 2015 plus a spread of 75 bps;

• $250 million 5.75% senior notes due Nov. 1, 2015 will be based on the 0.25% Treasury note due Jan. 31, 2015 plus a spread of 125 bps; and

• $400 million 6.25% senior notes due Aug. 15, 2016 will be based on the 0.375% Treasury note due Feb. 15, 2016 plus a spread of 160 bps.

The total purchase price will include $20 per $1,000 principal amount of notes tendered by 5 p.m. ET on March 8, the early tender date.

The tender offer will end at midnight ET on March 22.

Holders who tender after the early deadline will receive the total payment less the early premium.

Tendered notes may be withdrawn by the early tender deadline.

The company also will pay accrued interest up to but excluding the payment date.

Citigroup Global Markets Inc. (800 558-3745 or collect 212 723-6106) and RBC Capital Markets, LLC (877 381-2099 or collect 212 618-7822) are the dealer managers. Global Bondholder Services Corp. (866 952-2200 or 212 430-3774) is the tender agent and information agent.

CommonWealth, a Newton, Mass.-based office and industrial real estate investment trust, will use proceeds for general business purposes.

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