Equity Commonwealth (NYSE:EQC) entered into a definitive merger agreement to acquire Monmouth Real Estate Investment Corporation (NYSE:MNR) from Blackwells Capital LLC, The Vanguard Group, Inc., BlackRock, Inc. (NYSE:BLK), Wasatch Advisors Inc. and others for $1.9 billion on May 4, 2021. Under the terms of the agreement, Monmouth shareholders will receive 0.67 shares of Equity Commonwealth stock for every share of Monmouth stock they own. This exchange ratio represents approximately $19.40 per Monmouth share. The merger agreement provides for Monmouth to declare and pay one additional regular quarterly common stock dividend of $0.18 per share without Equity Commonwealth paying a corresponding common dividend to its shareholders. The transaction is valued at approximately $3.4 billion, including the assumption of debt. Accordingly, the total consideration to be received by the Monmouth shareholders in the transaction is $19.58 per Monmouth share. Equity Commonwealth and Monmouth shareholders are expected to own approximately 65% and 35%, respectively, of the pro forma company following the close of the transaction. In case of termination by MNR, MNR will be required to pay EQC a termination fee of approximately $62.2 million. As per the amended agreement signed between the parties on August 15, 2021, Equity Commonwealth revised its offer to pay a total value of $19 per share in a combination of cash and stock at the election of Monmouth shareholders. Total consideration for the transaction is $3.4 billion, including the assumption of $857 million of mortgage debt, and the repayment of the $550 million of Monmouth's 6.125% Series C Redeemable Preferred Stock and Monmouth's outstanding line of credit and term loan. Under the new terms of the agreement, Monmouth shareholders will have the option to elect to receive, for each Monmouth common share, either (i) $19 of cash or (ii) 0.713 shares of EQC stock. Pursuant to the terms of the agreement, the aggregate cash consideration will be $641 million, and the transaction will result in the issuance of 46.2 million EQC common shares. In the event Monmouth shareholders, in the aggregate, elect to receive in excess of $641 million in cash or 46.2 million EQC shares, the cash and stock consideration will become subject to proration. Depending on the extent of proration, a Monmouth shareholder electing the cash consideration will receive no less than $6.50 in cash for each Monmouth common share with the balance paid in EQC common shares. A Monmouth shareholder electing the stock consideration will receive no less than 0.469 shares of EQC common shares, representing a value of $12.50 per share, with the balance paid in cash. In connection with the revised offer, the termination fee will increase by approximately $10 million to $72 million. Equity Commonwealth and Monmouth shareholders are expected to own approximately 73% and 27%, respectively, following the close of the transaction.


There will be no change in name, trading venue and headquarter of Equity Commonwealth. The combined company will continue to be led by President and Chief Executive Officer David Helfand and the existing senior management team. Upon closing, the number of trustees on Equity Commonwealth's board will be expanded to 10, with two individuals designated by Monmouth's board. Sam Zell will remain the Chairman of the Board of Trustees. The transaction is subject to customary closing conditions, including approval by the common shareholders of both Equity Commonwealth and Monmouth, approval from the NYSE for the listing of the EQC common shares to be issued in the merger, effectiveness under the Securities Act of the Form S-4 registration statement, receipt by EQC and by MNR of an opinion to the effect that the merger will qualify as a “reorganization” within the meaning of Section 368(a) of Code and of an opinion as to the qualification of MNR and EQC, respectively, as a real estate investment trust under the Code and others. The meeting of the shareholders of MNR and EQC is scheduled on August 17, 2021 to approve the transaction. If the EQC merger proposal is not approved at the special meeting, MNR will be permitted to terminate the EQC Merger Agreement and accept the Starwood proposal. The Board of Trustees of Equity Commonwealth and the Board of Directors of Monmouth Real Estate have each unanimously approved the transaction. As of July 23, 2021, registration statement on Form S-4 with the SEC filed became effective. As on August 15, 2021, the Board of Trustees of Equity Commonwealth and the Board of Directors of Monmouth Real Estate have each unanimously approved the amended Merger Agreement Board and recommended the shareholders to vote in favor of the transaction. Monmouth shareholders scheduled a meeting for August 24, 2021 to approve the transaction. Starwood encourages Monmouth Shareholders to Vote “AGAINST” EQC Merger Proposal. Goldman Sachs provided the fairness opinion that the amended merger agreement was fair, from a financial point of view, to EQC. J.P. Morgan and CSCA provided the fairness opinion that the amended merger agreement was fair, from a financial point of view to Monmouth. As on August 18, 2021, Blackwells opposed the revised terms of sale and encourages shareholders to vote against the merger with EQC and Monmouth's shareholders are scheduled to vote on the deal on August 31, 2021. The transaction is expected to close during the second half of 2021. As announced on August 16, 2021, the transaction is currently expected to close September 9, 2021.

Goldman Sachs & Co. LLC is acting as financial advisor and fairness opinion providers and Stuart A. Barr, Cameron N. Cosby, Matthew V. Soran, Andrea Gede-Lange, Amy L. Blackman, Scott B. Luftglass, Joshua D. Roth, Suzanne deVries Decker, Alan S. Kaden, Donna Mussio, Melissa A. Meyrowitz, Ryan L. Conley, Lauren Athans, and Megan K. Misencik of Fried, Frank, Harris, Shriver and Jacobson LLP is serving as legal advisors to Equity Commonwealth. Vineet Seth, Nathan Brunner and Sal Gambino of J.P. Morgan Securities LLC and Brad Razook, Laurent de Marval and Joel Mancl of CS Capital Advisors, LLC are acting as financial advisors and fairness opinion providers and Jeffrey S. Lowenthal, Christopher J. Doyle, Daniel A. Fliman, Kristopher M. Hansen, Michelle M. Jewett, Brian P. Kelly, Austin S. Lilling, Marija Pecar, Patrick N. Petrocelli, Jeffrey D. Uffner, Jon S. Ziefert and James Z. Fang of Stroock & Stroock & Lavan LLP are serving as legal advisors to Monmouth. Morrow Sodali Global LLC acted as an information agent for Blackwells Capital LLC. D.F. King & Co., Inc. acted as proxy solicitor to Equity Commonwealth and received a fee of $25000 while Okapi Partners LLC acted as proxy solicitor to Monmouth and will receive a fee of $950,000. EQC has agreed to pay Goldman Sachs a transaction fee of $16 million all of which is contingent upon the consummation of the merger. MNR has agreed to pay J.P. Morgan an estimated fee of approximately $15 million, $3 million of which became payable to J.P. Morgan at the time J.P. Morgan delivered a prior opinion dated May 4, 2021 to the MNR Board, $1.5 million of which became payable to J.P. Morgan at the time J.P. Morgan delivered its opinion dated August 15, 2021 to the MNR Board and the remainder of which is contingent and payable upon the consummation of the merger. The transfer agent and registrar for the EQC common shares is Equiniti Trust Company. CSCA Capital Advisors, LLC will receive a non-contingent fee from MNR for its services of $1 million which became payable upon the delivery of CSCA's opinion (in addition to the $1 million fee paid to CSCA in May 2021 in connection with the delivery of CSCA's original opinion).