Forest City Realty Trust Inc. (FCE.A, Financial), a major holding of Third Avenue Management (Trades, Portfolio), traded over 8% higher in Tuesday morning trading on a merger agreement with Brookfield Asset Management Inc. (BAM, Financial).
Trade details
On Tuesday, Brookfield and Forest City entered into a definitive merger agreement in which Brookfield Property Partners LP (BPY, Financial) will acquire all outstanding shares of Forest City for $25.35 per share in cash, representing a 26.6% premium over Forest City’s share price on June 15.
The merger is not subject to a financing condition, one key characteristic of a successful merger according to John Paulson (Trades, Portfolio)’s merger arbitrage checklist. Forest City’s board of directors has recommended the merger, which is expected to close in the fourth quarter, and is subject to shareholder approval and other customary closing conditions.
Target background
Brookfield Property Partners CEO Brian Kingston said in the merger announcement that Forest City “has created a high-quality portfolio of operating and development assets over its 100-year history.” The Cleveland-based real estate investment trust’s portfolio consists of several “iconic assets” across the U.S., including 6.3 million square-feet in high-quality office space and five large-scale development projects across New York, San Francisco and Washington D.C.
Forest City CEO David LaRue said he is pleased that Brookfield “recognizes the success of [Forest City’s] ongoing efforts to strengthen the business” and the “significant opportunities to drive future growth embedded in [the company’s] over 18 million square feet of entitlements.” GuruFocus ranks Forest City’s Piotroski F-score 7 out of 9 as the company has positive returns on assets and increasing current ratios, gross margins and asset turnover year over year.
See also
As of the second quarter, Third Avenue dedicated 31.1% of its portfolio to the real estate sector. Forest City, the firm’s second-largest holding, represents 8.13% of the portfolio.
The firm’s other top REIT holdings include Macerich Co. (MAC, Financial), Vornado Reality Trust (VOR, Financial), First Industrial Reality Trust (FR, Financial) and Acadia Reality Trust (AKR, Financial).
Disclosure: No positions.
