Just weeks after an activist shareholder pushed a major senior housing asset management firm, the company has fired back, calling the “attention-grabbing” tactic “ill-conceived” and a distraction.
NorthStar Asset Management (NYSE: NSAM) was put under pressure at the start of 2016 after shareholder Jonathan Litt, founder and chief investment officer of New York-based hedge fund Land and Buildings (L&B), wrote a public letter that the asset management company was materially undervalued and should recombine with its parent company to save its declining stock prices.
NSAM snapped right back on Tuesday.
“The letter from L&B contains significant factual errors and is merely an attention-grabbing tactic for an ill-conceived proxy campaign,” the company stated in a press release.
NSAM spun off from real estate investment trust (REIT) NorthStar Realty Finance (NYSE: NRF) in late 2013, and has since seen its stock plummet.
Litt had urged in his public letter that NSAM consider recombining NRF, noting the potential move could be worth billions.
NSAM denounced Litt’s calculations and claimed the actual value would be significantly less in a potential recombination.
“L&B grossly overstates the amounts involved under a potential recombination with NRF and further false implies that a recombination transaction would trigger cash severance payments,” NSAM stated.
L&B didn’t back down after this response.
“We stand by our facts and figures, which were based on NSAM’s own proxy filing,” Litt told Senior Housing News in an email.
NSAM also responded to Litt’s demand that the company consider strategies with an independent committee. The company noted Tuesday there are three independent directors that have engaged separate independent legal advisors.
“Regardless of how the company parses words, we believe the change of control payments for management are preposterously high and as a result of this process, suffers from inherent conflict of interest,” Litt said. “This is why we strongly believe there needs to be new independent directors added, and a separate committee formed—made up solely of the independent directors—which will evaluate and approve any transaction with management not included in the vote.”
NSAM previously announced it would begin a process of exploring alternative strategies to recapture shareholder value with support from financial and legal advisors.
However, recombining is not off the table entirely. In a public filing, NRF executives noted they are exploring the possibility of a recombination with NSAM and have hired an investment bank as an advisor. The REIT did not share a specific plan or timeline, but is currently underway with a strategic stock buyback plan. NRF also disclosed it intends to sell off its share in a $900 million senior housing portfolio to fund its stock buyback strategy and boost shareholder value.
NSAM also stated that it will continue its work without distraction from L&B.
“Consistent with best practice, NSAM has provided an appropriate level of disclosure to investors and believes that any additional disclosure at this time could harm the process and undermine shareholders’ interests,” the company stated in its press release.
Written by Amy Baxter