Forest City acquired by Brookfield Asset Management in a $6.8 billion deal

July 31, 2018

Forest City acquired by Brookfield Asset Management in a $6.8 billion deal

CLEVELAND, Ohio - Brookfield Asset Management Inc. agreed to acquire Forest City Realty Trust Inc., one of Cleveland’s best-known companies, for about $6.8 billion, $11.4 billion value including debt, Bloomberg news reported this morning.

The Toronto-based alternative asset manager said in a statement Tuesday morning it will acquire Forest City for $25.35 a share in cash, a 10 percent premium over where shares closed Monday and about 26 percent above where they were trading the day before Bloomberg reported that the pair had restarted talks.

“Forest City has created a high-quality portfolio of operating and development assets over its 100-year history. We look forward to creating further value in these great assets on behalf of our limited partners,” said Brian Kingston, chief executive officer of Brookfield Property Group.

The acquisition comes just four months after Cleveland-based Forest City said it had completed a strategic review and decided shareholders would be better off if it remained a standalone company.

Back then, the publicly traded company announced a dramatic board shakeup, concluding a strategic review that started six months ago. The company’s leaders then in an open letter to shareholders, said a sale or merger ultimately didn’t seem like the best way to boost shareholder value. Instead, nine of 13 directors - including members of the Ratner family, which founded the company - would resign.

Representatives from activist investors Starboard Value and Scopia Capital Management, who both own Forest City shares, were among those named to the board. Starboard and Scopia, which collectively hold about 14 percent of Forest City’s shares, said Tuesday they have agreed to support the transaction.

In March, Forest City said that 18 interested buyers had entered into confidentiality agreements. One large financial investor, which people familiar with the process identified as Brookfield, made a non-binding proposal of $26 a share for the company. The board ultimately decided not to pursue that transaction, which was revised to $25 a share as of March 13, with a number of conditions attached.

Forest City said at the time it would have supported a $25.50 all-cash deal with dividends paid through closing, and no conditions related to third-party consents or the completion of an internal reorganization.

Forest City, founded by the Ratner family in 1920, focuses on commercial and residential projects, including mixed-use developments, according to its website. The company built the Frank Gehry-designed residential tower on Spruce Street in lower Manhattan and owns substantial life sciences office space in Cambridge, Massachusetts.

Buying Forest City would be the second sizable real estate transaction for Brookfield and its affiliates this year. In March, Brookfield’s real estate arm agreed to take U.S. mall owner GGP Inc. private in a deal valued at about $15 billion.

Forest City shares rose 8 percent in early trading Tuesday after Bloomberg reported the companies were nearing a deal, hitting $24.87 a share at 8:45 a.m. in New York before they were halted.

— With assistance by Kiel Porter

By Scott Deveau and Gillian Tan at Bloomberg

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