FCEA Forest city Enterprises Inc(class A)

By Cara Lombardo 

Forest City Realty Trust Co.'s former chief executive, the son of one of its founders, plans to publicly oppose a deal to sell the nearly 100-year-old property empire and urge other shareholders to do the same, according to people familiar with the matter.

Albert Ratner, who controls nearly 1% of Forest City's stock, is preparing to send a public letter arguing that a deal to sell Forest City for roughly $6.8 billion in cash to Brookfield Asset Management Inc. was ill-conceived and that the company could have a higher value in the future, according to a draft of the letter reviewed by The Wall Street Journal.

His opposition challenges a deal already on shaky ground after Forest City's own board narrowly endorsed it in a 7-to-5 vote. Shareholders, including two activist investors who have already agreed to support the deal, are set to vote on the transaction Nov. 15.

Mr. Ratner is a member of the well-known family that started Forest City and that also includes New York real-estate developer Bruce Ratner.

Toronto-based Brookfield agreed in July to buy Forest City for $25.35 a share, or $11.4 billion including Forest City's debt. The price represented a 26.6% premium over Forest City's stock price before reports surfaced that the two were in talks.

Forest City's residential and commercial portfolio includes landmark properties such as the headquarters for the New York Times. It attracted Brookfield partly because it is concentrated in growing urban markets including Boston, San Francisco and Dallas.

Mr. Ratner, 90 years old, says in his letter that the split board agreed to the deal "at the wrong price, at the wrong time, through a flawed process." He argues that based on the company's own net-asset-value analysis, shareholders could receive 48% more for their shares, on a discounted basis, if they waited roughly 26 months, when tax restrictions stemming from the company's 2016 conversion to a real-estate investment trust expire. That is similar to arguments made by the dissenting directors, according to the company's recently filed proxy.

Directors who supported the deal argued it is the best option given that estimated future values aren't guaranteed, according to the proxy.

Mr. Ratner, who served as CEO from 1975 to 1995 and is a co-chairman emeritus, writes that the company shouldn't have initiated a sale process so soon after overhauling its board and making other changes meant to improve its stock price such as converting to a REIT and cutting costs and debt. He also notes the proxy indicates the board was deadlocked at 6-6 before Chief Executive David LaRue changed his vote.

Cleveland-based Forest City was founded by Mr. Ratner's father and others in 1920 and has historically been controlled by the Ratner family. In recent years it has come under pressure from investors including activist Scopia Capital Management LP and converted to a REIT to attract investors who focus on the sector.

Scopia and fellow activist Starboard Value LP, which together with their allies own roughly 14% of the company, joined Forest City's board as part of overhaul earlier this year and have agreed to vote their shares in favor of the deal.

Brookfield's offer requires signoff from a majority of the holders of shares outstanding.

Write to Cara Lombardo at cara.lombardo@wsj.com

(END) Dow Jones Newswires

October 25, 2018 00:13 ET (04:13 GMT)

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