Equity Commonwealth, a Chicago based, internally managed and self-advised real estate investment trust (REIT), and Monmouth Real Estate Investment Corporation (Monmouth) have entered into a definitive merger agreement by which Equity Commonwealth will acquire Monmouth in an all-stock transaction, valued at approximately $3.4 billion, including the assumption of debt.
”The combined company is expected to have a pro forma equity market capitalization of approximately $5.5 billion,” said Equity Commonwealth in a statement.
Under the terms of the agreement, Monmouth shareholders will receive 0.67 shares of Equity Commonwealth stock for every share of Monmouth stock they own.
Based on the closing price for Equity Commonwealth on May 4, 2021, this represents approximately $19.40 per Monmouth share. The merger agreement provides for Monmouth to declare and pay one additional regular quarterly common stock dividend of $0.18 per share without Equity Commonwealth paying a corresponding common dividend to its shareholders.
Accordingly, the total consideration to be received by the Monmouth shareholders in the transaction is $19.58 per Monmouth share.
Equity Commonwealth and Monmouth shareholders are expected to own approximately 65% and 35%, respectively, of the pro forma company following the close of the transaction.
“The transaction provides Equity Commonwealth with a high-quality, net-leased industrial business with stable cash flows while preserving EQC’s balance sheet capacity for future acquisitions,” said Sam Zell, Chairman of the Board of Equity Commonwealth.
“Monmouth provides an attractive and scalable platform,” said David Helfand, President, Chief Executive Officer and Trustee of Equity Commonwealth. “With significant cash and balance sheet capacity, we have the ability to grow the platform and create long-term value for shareholders.”
Monmouth’s portfolio is comprised of 120 properties totaling 24.5 million square feet. In addition, Monmouth has 6 properties totaling 1.8 million square feet under contract and leased to investment grade tenants.
Closings for these acquisitions are expected in 2021 and 2022.
“Following a strategic alternatives process, our Board unanimously determined that the merger with Equity Commonwealth is the best outcome to maximize value for Monmouth stockholders,” said Michael P. Landy, President and CEO of Monmouth. “Our stockholders will benefit from Equity Commonwealth’s preeminent leadership team, which has an exceptional track record of delivering shareholder value, its strong balance sheet and its focused strategy to build on Monmouth’s over 50 years of success creating a market leading industrial REIT.”
The company will continue to be led by President and Chief Executive Officer David Helfand and the existing senior management team. Upon closing, the number of trustees on Equity Commonwealth’s board will be expanded to 10, with two individuals designated by Monmouth’s board. Sam Zell will remain the Chairman of the Board of Trustees.