Flat Footed LLC Calls on Diversified Healthcare Trust to Finally Address Merger-Related Questions at its Annual Meeting of Shareholders
June 05 2023 - 7:30AM
Business Wire
Reiterates Intent to Vote AGAINST the Value-Destructive Proposed Merger with
Office Properties Income Trust, Which Would Enrich RMR Group at DHC
Shareholders’ Expense
Flat Footed LLC (together with its affiliates, “FFL” or “we”), a
top shareholder of Diversified Healthcare Trust (Nasdaq: DHC)
(“DHC” or the “Company”) and the owner of approximately 8.4% of the
outstanding common shares of the Company, today called on DHC’s
Board of Trustees (the “Board”) to address a series of pressing
questions at this morning’s Annual Meeting of Shareholders (the
“Annual Meeting”).
The Board has yet to respond to FFL’s May 23rd letter, which
highlights the numerous reasons why it believes DHC shareholders
should reject the proposed merger with Office Properties Income
Trust (Nasdaq: OPI) (“OPI”). Notably, FFL’s letter makes clear that
the transaction would result in a windfall to OPI and The RMR Group
LLC (“RMR”), which is the external manager for both REITs, at the
expense of DHC shareholders.
FFL believes DHC shareholders should ask the following questions
during today’s Annual Meeting, which is intended to be a forum for
open investor engagement:
- Why is the Board asking shareholders to accept a deal that
values DHC at a 90% discount to the Company’s intrinsic value?
- Why is the Board now recommending shareholders take an
all-stock bid valuing DHC at approximately $1.13 per share despite
rejecting an all-cash $4 per share bid just last year?1
- Why saddle DHC’s valuable senior housing property portfolio,
which is well-positioned for long-term growth, with OPI’s rapidly
declining commercial office properties?
- Why is DHC Managing Trustee and RMR Chief Executive Officer
Adam Portnoy buying DHC stock at prices far higher – averaging a
32% premium – than the anticipated merger consideration?
- How is it appropriate for Mr. Portnoy, a key executive of the
entity that manages the companies on both sides of the deal, to be
purchasing DHC stock while the merger is pending?
- If DHC’s ability to function as a “going concern” was really an
issue, why did the Company wait to make this disclosure until after
the proposed merger was announced?
- In light of the overlapping roles of some managers at DHC, OPI,
RMR, and DHC affiliate AlerisLife Inc., did any DHC managers recuse
themself from merger deliberations or Special Committee
meetings?
- Why did OPI delay the announcement of its dividend cut (from
$2.20 to $1.00) until after the proposed merger terms were
set?
- What “capital market participants” did DHC meet with to discuss
and evaluate financing options before agreeing to the deal with
OPI?
- Why has the Board not moderated its discretionary capital
spending and pursued targeted asset sales to pay down debt?
As a reminder, FFL intends to vote its DHC shares
AGAINST the proposed merger
with OPI to protect the long-term value and interests of all of the
Company stakeholders.
About Flat Footed
Flat Footed LLC is a special situation, value-oriented
investment management firm focused on leveraged, asset-heavy
companies with complex capital structures. The Flat Footed LLC team
has cumulatively managed $2.8 billion since founding their first
fund together in 1999. For more information, visit
www.flatfootedllc.com.
1 Based on OPI’s closing price of $7.70 on June 2, 2023 and the
0.147 exchange ratio.
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version on businesswire.com: https://www.businesswire.com/news/home/20230605005251/en/
For Investors: Flat Footed LLC ir@flatfootedllc.com
Okapi Partners LLC Mark Harnett (212) 297-0720
mharnett@okapipartners.com
For Media: Longacre Square Partners Greg Marose / Charlotte
Kiaie, 646-386-0091 FFL@longacresquare.com
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