Investing.com -- MCB Real Estate will not back down on its efforts to acquire Whitestone REIT (NYSE:WSR) despite recent offer rejection - the company told Investing.com exclusively.
At the beginning of June, the institutional investment management firm sent an official proposal to acquire the Houston, Texas-based WSR for $14 a share, all cash—a roughly 17% premium over the company’s 60-day volume weighted average price and 7% over the company’s 52-week high of $13.08 prior to MCB’s official offer.
“We made an all-cash proposal to acquire Whitestone REIT that would provide compelling and certain value to Whitestone shareholders,” a company spokesperson told Investing.com.
The offer was promptly declined by WSR’s Board, which claimed that the “indicated price does not represent a fair valuation,” according to the rejection letter.
Background numbers accessed exclusively by Investing.com, however, tell a different story. They indicate that WSR’s above-average stock price performance was significantly buoyed by takeover rumors and share buyouts from MCB itself, which now owns roughly 9.5% of MCB’s common shares.
Since rumors that Fortress Investment Group approached WSR’s Board for a takeover offer in October last year, the stock has rallied over 40%, compared to an average of 12% for the sector’s peers.
Unlike its strip center sector peers, WSR sailed unfazed through the changing interest rate environment as the Fed delayed interest rate cuts until September at least, according to current market projections. Considering the industry’s sensitivity to rates, the performance is nothing short of remarkable.
While the Fortress merger rumor did not follow through, the stock kept on getting pushed by external factors. This time, it was MCB itself who moved the needle by acquiring a hefty amount of the company’s stock.
Since January of this year, MCB has been steadily purchasing WSR stock, amassing approximately 4.7 million shares. This accounts for about 14% of the total trading volume during the period leading up to MCB’s offer submission earlier this month.
Volumes were even higher in May when WSR stock hit its 52-week prior to the official offer. During that month, MCB’s trading activity constituted roughly 31% of the total trading volume for WSR.
Taking these numbers into consideration, MCB’s $14/share offer may represent a premium of over 20% compared to WSR’s stock price before MCB began buying. Considering WSR’s stock price before the rumored Fortress bid, MCB’s offer could reflect a premium of more than 50% above the unaffected price.
These numbers indicate, on the one hand, that an eventual change of heart by MCB could result in severe headwinds for WSR shareholders. On the other hand, they also cast significant doubt on whether WSR’s Board response makes sense from an economic point of view.
Against this backdrop, MCB told Investing.com that it believes that further negotiation would lead to the best outcome for all parties involved.
“We urge the Whitestone Board to engage with us to negotiate a transaction that would allow the Company to maximize value for its shareholders,” the company told Investing.com exclusively.
An industry source who asked not to be identified told Investing.com exclusively that the possibility that MCB would raise its bid for WSR in an eventual negotiation is not out of the cards.