Mack-Cali Realty Corp. Chief Executive Officer Michael DeMarco sent a letter on behalf of the company’s board of directors to Howard Shainker, co-founder of Bow Street Special Opportunities Fund XV LP, regarding the previously announced unsolicited proposal from Bow Street and David Werner Real Estate Investments to acquire Mack-Cali’s suburban and waterfront office portfolios.
DeMarco’s letter states that the board continues to have serious concerns regarding Bow Street’s proposal, which has been previously rejected, and describes the rationale for determining the proposal is unworkable, grossly inadequate from a value perspective, and not in the best interests of Mack-Cali stockholders.
DeMarco’s letter was sent on April 15, Mack-Cali announced, prior to Bow Street’s filing of its preliminary proxy statement nominating four candidates for election to the company’s board of directors, and before the board received an April 16 letter from Bow Street reiterating its desire to acquire Mack-Cali’s suburban and waterfront office portfolio.
Additional reasoning outlined in the letter include the gross undervaluing of Mack-Cali’s commercial assets, and that Bow Street has not provided any evidence of its ability to finance the proposed transaction.
Demarco also stated that Bow Street has not demonstrated that it understands the significant leakage that would likely result from the material tax, frictional and other costs associated with the proposed transaction, nor has it stated how it would cover such leakage.
Bow Street’s proposal is based on unrealistic assumptions regarding the post-transaction trading levels of the new residential REIT, Mack-Cali said. The proposed transaction would leave Mack-Cali stockholders with shares of a small, highly leveraged public company unlikely to achieve an attractive market valuation.
The letter also describes the board’s efforts to work constructively with Bow Street in order to avoid a costly and distracting proxy contest. To this end, the board has expressed its willingness to nominate two independent candidates to be mutually selected by Bow Street and the company from Bow Street’s slate of four director nominees for election to the Mack-Cali Board at the 2019 Annual Meeting.
“It is unfortunate that instead of engaging in a constructive dialogue with the Company, Bow Street chose to make misleading and inaccurate statements regarding its grossly inadequate, unworkable and self-interested proposal,” said DeMarco. “The Board, in consultation with its financial and legal advisors, has given careful consideration to Bow Street’s proposal and determined that it is unworkable, illusory in nature and unlikely to deliver aggregate consideration to stockholders that would be anywhere near the hypothetical transaction value of $27.00 to $29.00 per share, as suggested by Bow Street in its letter to the Board.
“We believe that, despite its public statements about maximizing value for all stockholders, Bow Street is commencing a proxy contest to try to force a sale of Mack-Cali’s suburban and waterfront office assets far below their fair market value for its own benefit and to the detriment of all other Mack-Cali stockholders,” he added.