Land and Buildings and Orange Capital, LLC (“Orange Capital”) today
announced they have formed an investment group (“Orange/L&B”) to
advocate for change at Macerich Company (“Macerich” or the “Company”)
(NYSE: MAC). Orange/L&B also publicly released two letters sent by Land
and Buildings to Art Coppola, Chairman and Chief Executive Officer of
the Company.
The released letters clearly demonstrate that Land and Buildings
attempted to reach a settlement in good faith with Macerich. At the
request of Art Coppola, Land and Buildings offered to reach out to Scot
Sellers, former CEO of Archstone-Smith, and Richard Kincaid, former CEO
of Equity Office, to assess their interest in joining the Macerich Board
alongside Land and Buildings CIO Jonathan Litt.
Having failed to reach a settlement with Macerich, Orange/L&B will
pursue litigation to counter Macerich’s wrongful attempt to block the
Orange/L&B nominees through the courts and to ignore the voice of
shareholders. The letters also highlight the egregious governance
missteps undertaken by Macerich in relation to their refusal to
meaningfully engage with Simon Property Group.
Consider the following:
-
Since 2007 only five companies in the S&P 500 (including Macerich)
have unilaterally instituted a classified board, and three of those
companies have since declassified.
-
Remarkably, Macerich itself declassified its Board just six years
ago.
-
In 2009, the Macerich Board proposed, and the shareholders
approved by a 99% vote, declassification from the same three-class
structure the Board now has unilaterally put in place.
-
In recommending declassification of the Macerich Board in 2009 as
being in the "best interests" of the Company and stockholders, the
Macerich Board "recognize[d] that the election of directors is the
primary means for stockholders to influence corporate governance
policies and hold management accountable for implementing those
policies."
-
The Macerich Board also "recognize[d]" that declassified boards
"are in line with emerging practices in the area of corporate
governance, providing stockholders with the opportunity to
register their views on the performance of the entire Board each
year."
-
The Macerich Board adopted a shareholder rights plan, more commonly
known as a "poison pill," to prevent Simon (or anyone else) from
acquiring more than 10% of the Company's outstanding common stock.
-
Under the Poison Pill, current shareholders (excluding Simon) have
the "right" to acquire new Macerich shares at a 50% discount in
the event that a shareholder acquires more than a 10% stake in the
Company.
-
Although poison pills are not uncommon, Macerich's Poison Pill is
unusually onerous. It has been noted that of all poison pills
currently in effect, only 10% have a 10% threshold like the
Macerich Poison Pill. Of S&P 500 companies, only 2% have poison
pills with a trigger threshold of 10% or less.
The full text of the letters can be found below:
=======================
Jonathan Litt
Founder & CIO
Land and Buildings
April 15, 2015
Art Coppola
Chairman and Chief Executive Officer
The Macerich
Company
401 Wilshire Boulevard, Suite 700
Santa Monica,
California 90401
Dear Art:
You have gravely underestimated the damage you have done to Macerich by
re-staggering your Board, adopting a poison pill and now actively
seeking to block shareholders’ voices from being heard at the Annual
Meeting by litigating with us on the validity of our nominations. I will
remind you that in 2008, the Board proposed, and the shareholders
approved by a 99% vote, declassification from the same three-class
structure the Board now has unilaterally put in place. In recommending
declassification of the Board in 2009 as being in the "best interests"
of the Company and stockholders, the Board "recognize[d] that the
election of directors is the primary means for stockholders to influence
corporate governance policies and hold management accountable for
implementing those policies."
Your share price will likely remain higher than the prior unaffected
share price given Simon (NYSE: SPG) undoubtedly continues to be
interested as an acquirer. You should not take that as a sign that
investors have any confidence in you or your Board.
The opportunity still exists for you to abide by your fiduciary duties
for the benefit of your shareholders by, as a first step, putting three
new directors on your Board as we outlined in our April 12th
letter. You explicitly said you would like to have on your Board Scot
Sellers and Richard Kincaid, highly-regarded individuals that Land and
Buildings has nominated in other situations. You should also immediately
follow through on your commitment to de-stagger the Board and reengage
with Simon, given the fact that your own valuation shows that you are
only approximately 5% apart.
Mr. Sellers and Mr. Kincaid, as well as our existing nominees, are
highly regarded individuals in the real estate community who in our view
have established track records as sound fiduciaries who maximize value
for all shareholders.
Today we have signed an agreement with Orange Capital, who is partnering
with us to pursue our right to nominate our candidates at the annual
meeting, in spite of your attempt to block it thought the courts.
Together with Orange we intend to fight for the voice of shareholders to
be heard and force the Board to properly exercise their fiduciary duties.
All the best,
Jonathan Litt
Founder & CIO
Land and Buildings
=======================
Jonathan Litt
Founder & CIO
Land and Buildings
April 12, 2015
Art Coppola
Chairman and Chief Executive Officer
The Macerich
Company
401 Wilshire Boulevard, Suite 700
Santa Monica,
California 90401
Dear Art:
Thank for meeting me halfway in Chicago on Friday for lunch. As you know
we were deeply disappointed to see Macerich (NYSE: MAC) stagger its
Board in response to Simon's (NYSE: SPG) offer and believe there were
other alternatives that could have been pursued that stopped short of
corporate governance apocalypse. The maneuver you pursued has changed
the relationship between Macerich and its shareholders, where we – the
shareholders – no longer sense that you and the Board are acting in our
best interests. Why, for example, did you not ask Simon to enter into a
standstill agreement and invite them to engage in good faith
negotiations with the Board?
As you know, we have nominated four directors to your Board out of a
total of 12. I appreciate your sincere interest in resolving our
nominations. Specifically, you mentioned that you like nominees that
Land and Buildings has nominated in other situations, but did not
nominate for the Macerich Board. Notably, you told me that Scot Sellers,
former CEO of Archstone-Smith, and Richard Kincaid, former CEO of Equity
Office, are both blue chip board members who could add materially to
address the corporate governance issues at Macerich.
We would consider settling now and allowing the Company to return its
attention to its business as opposed to distracting management with a
proxy contest. We would agree to split the difference between your
proposal and ours and have three new directors appointed to the Board as
follows: Scot Sellers would be Chairman of the Board, Richard Kincaid
would be Lead Independent Director, and I would be an independent
director. If you are in agreement, I will speak with Scot and Richard to
see if they would be interested in joining the Macerich Board in the
capacities outlined above. If so, we would need to move with great
alacrity to get them together with the Nominating Committee.
As you know, your brother Eddy, the President of Macerich, at the Citi
conference in early March, worked hard to dissuade me from getting
involved in the Macerich/Simon situation. I made it clear to him this is
not about whether we are friends or not; that it is about selling when
someone offers you a more than full price. I cited to Eddy how Equity
Office accepted Blackstone’s (NYSE: BX) bid, Archstone-Smith accepted
Lehman Brothers’ bid and Hilton accepted Blackstone’s bid as examples of
good companies with good management teams recognizing the price offered
was more than fair.
As we discussed at lunch, Simon’s offer was around a 4.5% cap rate using
Macerich's 2016 net operating income estimate of $1.04 billion and a
$23.3 billion enterprise value implied by Simon’s last offer.1
As we further discussed and agreed, while several of your assets are
likely worth below a 4% cap rate there also several assets that would
sell for over a 6% cap rate. In the end you suggested the right cap rate
for Macerich is around a 4.25% cap rate on 2016 numbers. Applying a
4.25% cap rate would suggest the valuation is about $105 per share.
When I last spoke to David Simon, the Chairman and CEO of Simon Property
Group, as I understand his comment, the last offer he made to Macerich,
with Simon stock at $200 per share would likely value Macerich at over
$100 per share. It therefore appears both sides are quite close.
Although, as you mentioned, you believe the cash component of Simon’s
offer is light.
I hope you accept my offer to get you, David and me in a room to discuss
your differences. I believe there are some creative solutions to both
the philosophical and financial differences you each have that would be
appealing to you both.
Time is short, and if you insist on litigating the validity of our
nominations, we will have to have an answer to our Board suggestions by
no later than 5 pm on Tuesday April 14th.
All the best,
Jonathan Litt
Founder & CIO
Land and Buildings
_____________________
1 $1.04 billion of net operating income disclosed in
Macerich’s March 31, 2015 investor presentation. $23.2 billion value of
Simon’s offer disclosed in Simon’s March 20, 2015 press release.
About Land and Buildings:
Land and Buildings is a registered investment manager specializing in
publicly traded real estate and real estate related securities. Land and
Buildings seeks to deliver attractive risk adjusted returns by
opportunistically investing in securities of global real estate and real
estate related companies, leveraging its investment professionals' deep
experience, research expertise and industry relationships.
About Orange Capital, LLC:
Orange Capital, LLC, is an alternative asset management firm focused on
event-driven opportunities. Orange Capital was founded in 2005 by Daniel
Lewis and Russell Hoffman and is headquartered in New York.
ORANGE CAPITAL LLC, ORANGE CAPITAL MASTER I, LTD., DANIEL LEWIS
(COLLECTIVELY, “ORANGE CAPITAL”), LAND & BUILDINGS CAPITAL GROWTH FUND,
L.P., LAND & BUILDINGS INVESTMENT MANAGEMENT, LLC, JONATHAN LITT
(COLLECTIVELY, "LAND & BUILDINGS", AND, TOGETHER WITH ORANGE CAPITAL,
“ORANGE/L&B”), MARC GORDON, GREGORY HUGHES, AND JEREMY PEMBERTON
(TOGETHER WITH ORANGE/L&B, THE “PARTICIPANTS”) INTEND TO FILE WITH THE
SECURITIES AND EXCHANGE COMMISSION (THE "SEC") A DEFINITIVE PROXY
STATEMENT AND ACCOMPANYING FORM OF PROXY CARD TO BE USED IN CONNECTION
WITH THE PARTICIPANTS' SOLICITATION OF PROXIES FROM THE STOCKHOLDERS OF
THE MACERICH COMPANY (THE "COMPANY") FOR USE AT THE COMPANY'S 2015
ANNUAL MEETING OF STOCKHOLDERS (THE "PROXY SOLICITATION"). ALL
STOCKHOLDERS OF THE COMPANY ARE ADVISED TO READ THE DEFINITIVE PROXY
STATEMENT AND OTHER DOCUMENTS RELATED TO THE PROXY SOLICITATION, WHEN
THEY BECOME AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION,
INCLUDING ADDITIONAL INFORMATION RELATED TO THE PARTICIPANTS. WHEN
COMPLETED, THE DEFINITIVE PROXY STATEMENT AND AN ACCOMPANYING PROXY CARD
WILL BE FURNISHED TO SOME OR ALL OF THE COMPANY'S STOCKHOLDERS AND WILL
BE, ALONG WITH OTHER RELEVANT DOCUMENTS, AVAILABLE AT NO CHARGE ON THE
SEC'S WEBSITE AT HTTP://WWW.SEC.GOV/.
IN ADDITION, OKAPI PARTNERS LLC, ORANGE/L&B’S PROXY SOLICITOR, WILL
PROVIDE COPIES OF THE DEFINITIVE PROXY STATEMENT AND ACCOMPANYING PROXY
CARD, WHEN AVAILABLE, WITHOUT CHARGE UPON REQUEST.
INFORMATION ABOUT THE PARTICIPANTS AND A DESCRIPTION OF THEIR DIRECT OR
INDIRECT INTERESTS BY SECURITY HOLDINGS WILL BE CONTAINED IN AN EXHIBIT
TO THE SCHEDULE 14A TO BE FILED BY ORANGE/L&B WITH THE SEC ON APRIL 15,
2015. THIS DOCUMENT CAN BE OBTAINED FREE OF CHARGE FROM THE SOURCES
INDICATED ABOVE.
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