I generally have little interest in buyouts and all of the hoopla that surrounds them. More often than not, I find myself expending a lot of energy trying to keep up with the happenings -- for what ends up being a relatively small reward.
There are, however, exceptions. And since Agree Realty (NYSE: ADC) is a selection in our Motley Fool Income Investor service, I felt compelled to dig into the story surrounding Agree, including the $38.75 per share offer that Compson Holding has made for it. Compson made its latest offer public in Thursday's press release.
Agree Realty is a small, retail-focused, real estate investment trust (REIT). The company owns a number of shopping centers and single-tenant properties. Among its largest tenants are Borders Group (NYSE: BGP), Walgreen (NYSE: WAG), and Sears Holdings' (Nasdaq: SHLD) Kmart stores.
The press release states that Compson has spent three months and a significant amount of time performing due diligence on Agree Realty before making its original offer of $34.50, its second offer of $36, and now its third offer of $38.75 per share. Compson already holds 3.1% of Agree Realty's shares. On a pure short-term, what's-the-company-worth-right-now perspective, the offer seems fair to me. However, it is a cash offer, and investors in Agree Realty would be forced to find a place to reinvest. There are worse things in life, but this is a small company that should have plenty of room to expand and grow in the coming years.
This brings us to management, which has been publicly silent on all three of the offers that Compson has made so far. The company has, however, rejected Compson's first two offers and told Compson that it believes the offer is "not in the best interest of the shareholders." Given that the current market price of the shares is only $33, it appears the market does not expect a deal to go through any time soon.
On the surface, I have no problem with Agree Realty's initial response. In general, I much prefer to hold a small, growing company rather than have it cashed out for a short-term gain, however lucrative the gain may be. But I do believe the company needs to communicate to its shareholders -- not just to Compson -- and explain exactly why the offer isn't in their best interest at this time. The offer from Compson represents a 17% premium over today's share price, which has already jumped on reports of Compson's previous offers. While in the long term a 17% premium may be small potatoes, it appears that Compson is serious about its offer and it doesn't take much time or effort on the part of Agree Realty's board of directors to explain their position.
For more REIT Foolishness:
Agree Realty is a
Motley Fool Income Investor
recommendation.
Nathan
Parmelee has no financial interest in any of the companies mentioned. The Motley Fool has an ironclad disclosure policy.
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