Company Notes Meister’s Role in the
Over-Leveraging of ADT for Corvex’s Gain to the Detriment of
Long-Term ADT Shareholder Value
Meister’s Parallel Scheme at CommonWealth
REIT Should Raise Further Doubt Regarding the True Intentions of
Related/Corvex
CommonWealth REIT (NYSE:CWH) today issued a statement regarding
the role of Keith Meister, principal of the hedge fund Corvex
Management LP (“Corvex”), in significantly increasing the leverage
of The ADT Corporation (NYSE:ADT) for his own benefit and to the
detriment of ADT’s long-term shareholders.
The CWH Board of Trustees believes that a similar financial
engineering scheme is now being pursued by Related Fund Management,
LLC and Corvex (“Related/Corvex”) at CWH. As was the case with ADT,
Meister is advocating financial strategies that might provide a
short term benefit for Corvex at the expense of long-term
shareholder value at CWH.
In October 2012, Meister outlined his position that ADT’s stock
was significantly undervalued and could be worth almost 65% more
within a year if ADT followed his plan*. Meister urged ADT to
significantly increase its leverage by raising debt and to use
those proceeds to repurchase shares of ADT’s common stock. Under
pressure from Meister and the threat of a costly and disruptive
proxy contest, in December 2012, ADT’s board approved the
repurchase of $2 billion worth of shares and added Meister to the
ADT board. In November 2013, ADT agreed to repurchase an additional
10.2 million shares of ADT stock from Corvex, as part of an
agreement for Meister’s departure from the ADT Board. Corvex’s most
recent 13F filing with the Securities and Exchange Commission
confirms the short-term nature of Meister’s investment; as of
December 31, 2013, Corvex had liquidated its entire position and
owned no shares of ADT.
The ADT scheme provided Corvex with a return of approximately
20%**, while leaving the company in a significantly weaker
financial position with substantially increased debt leverage and
lower credit ratings. Since Meister locked in his profits and
resigned from the ADT Board less than four months ago, ADT’s stock
has declined by approximately 29%.***
Adam Portnoy, Managing Trustee and President of CWH made the
following statement:
“Meister’s track record of over-leveraging
ADT for his own benefit while leaving shareholders ‘holding the
bag’ should raise further doubt as to the purpose of
Related/Corvex’s campaign to gain control of CWH.
“Meister gained a seat on the ADT Board under
the threat of a proxy contest, implemented his financial
engineering scheme, and then facilitated his own exit at a handsome
profit, while destroying long-term value for other ADT shareholders
in the process.
“As at ADT, Related/Corvex’s scheme for CWH
appears to be to put as much debt as possible on the company in
order to buy back shares. Related/Corvex have also indicated that
they would consider selling CWH’s best assets to fund these share
repurchases. While this strategy might provide Related/Corvex with
short term gains, it would put at risk CWH’s dividends and
investment grade debt ratings. This scheme would also undermine the
secure and growing cash flows sought by most REIT investors, and we
believe it would threaten the viability of the company in the
long-term. Once in control of CWH, Related/Corvex could execute a
repeat of the ADT scheme, locking in profits and selling their CWH
shares and leaving CWH shareholders to suffer the long-term
costs.
“We believe his past actions make it clear
that Meister is not genuinely committed to either good governance
or the best interest of all CWH shareholders.”
For more information about Meister/Corvex’s investment in ADT
see: “ADT loses peace of mind after Meister’s corporate raid” by Al
Lewis, The Wall Street Journal, February 5, 2014, and “Why ADT Is
Appalling” by Herb Greenberg, The Street, January 30, 2014.
*Calculated based on ADT’s closing stock price of $38.32 on
October 24, 2012 and Meister projected ADT share price of
$63/share.
**Rate of return calculated based on estimated ADT stock price
when Corvex bought shares in October 2012 ($36-$38) and closing
stock price of $44.01 on November 22, 2013. Assumes dividends are
reinvested on ex-date.
***Based upon closing price of $31.24/share on March 5, 2014
compared to Meister’s sale price of $44.01/share.
CommonWealth REIT is a real estate investment trust that
primarily owns office properties located throughout the United
States. CWH is headquartered in Newton, MA.
WARNING REGARDING
FORWARD LOOKING STATEMENTS
THIS PRESS RELEASE INCLUDES FORWARD LOOKING STATEMENTS WITHIN
THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
AND OTHER SECURITIES LAWS. THESE FORWARD LOOKING STATEMENTS ARE
BASED UPON CWH'S PRESENT BELIEFS AND EXPECTATIONS, BUT THEY ARE NOT
GUARANTEED TO OCCUR AND MAY NOT OCCUR FOR VARIOUS REASONS,
INCLUDING SOME REASONS BEYOND CWH’S CONTROL.
ADDITIONAL INFORMATION
REGARDING THE CONSENT SOLICITATION
CWH, its Trustees and certain of its executive officers, and
Reit Management & Research LLC and certain of its directors,
officers and employees may be deemed to be participants in the
solicitation of consent revocations from shareholders in connection
with the solicitation being conducted by Related/Corvex. On January
29, 2014, CWH filed a definitive consent revocation statement with
the SEC in response to the Related/Corvex solicitation and has
mailed the definitive consent revocation statement and form of
WHITE consent revocation card to each shareholder entitled to
deliver a written revocation in connection with the consent
solicitation. SHAREHOLDERS ARE URGED TO READ THE DEFINITIVE CONSENT
REVOCATION STATEMENT FILED WITH THE SEC, AND ANY AMENDMENTS OR
SUPPLEMENTS THERETO AND ANY OTHER RELEVANT DOCUMENTS THAT CWH MAY
FILE WITH THE SEC WHEN THEY BECOME AVAILABLE, BECAUSE THEY CONTAIN
IMPORTANT INFORMATION. Additional information regarding the
identity of the potential participants and their direct or indirect
interests, by share holdings or otherwise, is set forth in the
definitive consent revocation statement filed by CWH with the SEC
in connection with the solicitation of revocations of consents.
Shareholders may obtain free of charge copies of the definitive
consent revocation statement and any other documents filed by CWH
with the SEC in connection with the Related/Corvex solicitation at
the SEC’s website (http://sec.gov), at CWH’s website
(http://cwhreit.com) or by requesting these materials from Timothy
Bonang, by phone at (617) 796-8222, or by mail at Two Newton Place,
255 Washington Street, Newton, MA 02458 or by requesting materials
from the firm assisting CWH in the solicitation of consent
revocations, Morrow & Co., LLC, toll free at (800) 276-3011
(banks and brokers call collect at (203) 658-9400).
A Maryland Real Estate Investment Trust with
transferable shares of beneficial interest listed on the New York
Stock Exchange.No shareholder, Trustee or officer is personally
liable for any act or obligation of the Trust.
Media:Joele Frank Wilkinson Brimmer KatcherAndrew
Siegel/Jonathan Keehner212-355-4449orInvestor:CommonWealth
REITTimothy Bonang, 617-796-8222Vice President, Investor
RelationsorJason Fredette, 617-796-8222Director, Investor
Relationswww.cwhreit.com
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