(Adds details from proxy advisors, background on bid, share
By John Tilak and Carl O'Donnell
TORONTO/NEW YORK Feb 27 Milestone Apartments
Real Estate Investment Trust, which last month agreed
to be acquired by Starwood Capital Group for about C$1.7 billion
($1.3 billion), has started talks with the U.S. private
investment firm about raising the initial bid, people familiar
with the situation told Reuters.
The move comes days after proxy advisory firm Institutional
Shareholder Services (ISS) issued a report recommending
Milestone unitholders vote against the transaction.
Milestone’s units, which were unchanged before the Reuters
report, rose 2 percent to C$21.48 as volume jumped, crossing the
current offer of C$21.18.
Milestone and Starwood could agree on a higher price and
make an announcement as soon as early this week, the sources
said. But they cautioned there was no certainty a deal would be
reached at a higher price.
The sources declined to be identified as the talks are
confidential. Spokesmen for both Milestone and Starwood declined
On Jan. 19, Milestone agreed to be bought out by Starwood
for $16.15 per Milestone unit in an all-cash transaction.
Based on currency exchange rates at the time, it translated
to a premium of about 9.2 percent above the unit's closing price
of C$19.66 before the transaction was announced.
Dallas-based Milestone, which went public in Toronto in
2013, owns and manages apartment properties targeting
blue-collar workers across the U.S. southeast and southwest.
With a focus on real estate, Barry Sternlicht-led Starwood
Capital manages assets of about $52 billion.
Last week, proxy advisory service Glass Lewis encouraged
unitholders to vote for the transaction, while ISS went the
“The fact pattern in the transaction indicates speed and
certainty were prioritized over price, apparently out of
concerns that cyclical factors will put pressure on REIT
valuations,” ISS said in its report on Feb. 22.
In a response the same day, Milestone said its “board and
special committee engaged in a comprehensive process to maximize
value for the REIT's unitholders.”
The trust received some approaches in the past two years,
Milestone said in a recent regulatory filing, but had not
received an alternative bid since the Starwood deal.
In its report, Glass Lewis said “the purchase price
represents a compelling value at which Milestone unitholders can
cash out their investment in the REIT and immediately realize an
assured value, in cash, at a meaningful premium.”
The deadline to vote on the existing bid is March 3.
($1 = 1.3095 Canadian dollars)
(Reporting by John Tilak in Toronto and Carl O'Donnell in New
York; Editing by Denny Thomas and Jeffrey Benkoe)