UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14D-9
(Rule 14d-101)
SOLICITATION/RECOMMENDATION STATEMENT
UNDER SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. 4)
CoreSite
Realty Corporation
(Name of Subject Company)
CoreSite
Realty Corporation
(Name of Person Filing Statement)
COMMON
STOCK, PAR VALUE $0.01 PER SHARE
(Title of Class of Securities)
21870Q105
(CUSIP Number of Class of Securities)
Jeffery S. Finnin
Chief Financial Officer
CoreSite Realty Corporation
1001 17th Street, Suite 500
Denver, CO 80202
(866) 777-2673
(Name, address and telephone numbers of person
authorized to receive notices and communications
on behalf of the persons filing statement)
With copies to:
Adam O. Emmerich
Zachary S. Podolsky
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
(212) 403-1000
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¨
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Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer.
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This
Amendment No. 4 amends and supplements the Solicitation/Recommendation Statement on Schedule 14D-9 (as amended or supplemented
from time to time, the “Schedule 14D-9”) previously filed by CoreSite Realty Corporation (the “Company”),
a corporation organized under the laws of Maryland, with the Securities and Exchange Commission on November 29, 2021, relating to
the tender offer by Appleseed Merger Sub LLC, a Maryland limited liability company (“Purchaser”) and a wholly
owned subsidiary of Appleseed Holdco LLC, a Delaware limited liability company (“Holdco”) and a wholly owned
subsidiary of American Tower Investments LLC, a California limited liability company (“Parent”) and a subsidiary
of American Tower Corporation, a Delaware corporation (“American Tower”), to purchase all of the outstanding
shares of the Company’s common stock, par value $0.01 per share (the “Shares” and each, a “Share”)
at a price per Share of $170.00, without interest and subject to any applicable withholding taxes, net to the seller in cash, upon the
terms and subject to the conditions set forth in the Offer to Purchase, dated November 29, 2021, as it may be amended or supplemented
from time to time, and the related Letter of Transmittal, as it may be amended or supplemented from time to time (together with the Offer
to Purchase, the “Offer”). Any capitalized term used and not otherwise defined herein shall have the meaning
ascribed to such term in the Schedule 14D-9.
Except as otherwise set forth below, the information
set forth in the Schedule 14D-9 remains unchanged and is incorporated herein by reference to the extent relevant to the items in this
Amendment No. 4. This Amendment No. 4 is being filed to reflect certain updates as set forth below. For clarity, new text within
restated paragraphs from the Schedule 14D-9 are highlighted with bold, underlined text, and stricken-through text shows text being deleted
in the Schedule 14D-9.
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Item 3.
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PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS.
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Item 3 of the Schedule 14D-9 is hereby amended and supplemented
as follows:
The
last sentence of the first paragraph on page 4, under the heading “Confidentiality Agreement”, is
amended and restated as follows:
The Confidentiality Agreement also includes customary two-year standstill
restrictions, including a customary “don’t ask, don’t waive” provision, which restrictions terminate
in the event any person enters into a definitive agreement with the Company to acquire more than 50% of the Company’s outstanding
voting securities, among other circumstances.
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Item 4.
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THE SOLICITATION OR RECOMMENDATION.
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Item 4 of the Schedule 14D-9 is hereby amended and supplemented
as follows:
The second sentence in the last paragraph on page 14, under
the heading “Background of the Offer and the Mergers”, is amended and restated as follows:
Later
that monthOn July 7, representatives of one of these private equity firms participated in a discussion
with Company representatives regarding the possibility of collaborating with respect to joint venture or acquisition financing transactions.
The second full paragraph on page 16, under the heading “Background
of the Offer and the Mergers”, is amended and restated as follows:
“On August 24 and 31, 2021, Mr. Szurek and Mr. Bartlett
further discussed a potential change-of-control transaction between the Company and American Tower. No specific proposals
were made during these conversations.”
The third sentence of the fourth full paragraph on page 18,
under the heading “Background of the Offer and the Mergers”, is amended and restated as follows:
On November 11, 2021, Party A and American Tower submitted revised
acquisition proposals, including revised markups of the form merger agreement. Both proposals indicated that they were “final.”
Party A’s proposal contemplated consideration consisting of a fixed exchange ratio of shares of Party A common stock
per Share and $16.50 in cash per Share (implying an approximately $164.58 per Share value based on the market price of Party
A’s common stock at the time).
The table and related footnotes appearing under the heading “Management
Projections” in the first full paragraph on page 24 is amended and restated as follows:
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Fiscal Year Ending December 31,
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(Dollars in millions, other than per share amounts)
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2021E (1)
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2022E
|
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2023E
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2024E
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2025E
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Total Revenue
|
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$
|
650
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|
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$
|
702
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|
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$
|
751
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|
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$
|
815
|
|
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$
|
877
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Total
Operating Expenses (2)
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$
|
274
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|
|
$
|
296
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|
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$
|
315
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|
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$
|
339
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|
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$
|
358
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EBITDA (3)
|
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$
|
331
|
|
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$
|
353
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|
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$
|
381
|
|
|
$
|
418
|
|
|
$
|
458
|
|
Adjusted EBITDA (4)
|
|
$
|
346
|
|
|
$
|
373
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|
|
$
|
403
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|
|
$
|
441
|
|
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$
|
483
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|
Capital Expenditures
|
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$
|
142
|
|
|
$
|
195
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|
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$
|
299
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|
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$
|
170
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|
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$
|
161
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FFO / Share (5)
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$
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5.60
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|
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$
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6.01
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$
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6.52
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|
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$
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7.11
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|
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$
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7.71
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AFFO / Share (6)
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$
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5.27
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$
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6.00
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|
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$
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6.54
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|
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$
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7.18
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|
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$
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7.71
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Net Income / Share
(7)
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$
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2.07
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$
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2.33
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$
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2.92
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|
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$
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3.33
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|
|
$
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3.87
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Unlevered Free Cash Flows (8)
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|
|
|
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$
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128
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|
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$
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41
|
|
|
$
|
236
|
|
|
$
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289
|
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(1) Includes actual amounts for the six-month period ended June 30,
2021, plus projections for the six-month period ended December 31, 2021.
(2) Total Operating Expenses is defined as the summation
of the following categories of expense: property operating and maintenance, real estate taxes and insurance, sales and marketing, and
rent.
(3) EBITDA is defined as earnings before interest, taxes,
depreciation and amortization, gains or losses from the sale of depreciated property, and impairment of depreciated property.
(42) Adjusted EBITDA is defined as EBITDA,
after adding back non-cash compensation expense, transaction costs from unsuccessful deals and business combinations and litigation expense
as well as adjusting for the impact of other impairment charges, gains or losses from sales of undepreciated land and gains or losses
on early extinguishment of debt. In the second fiscal quarter of 2021, the Company excluded from adjusted EBITDA a one-time, non-cash
benefit of $3.1 million as a result of the release of a tax liability during the quarter that is no longer expected to be incurred.
(53) FFO / Share is defined as the quotient
of (i) net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from sales of property and undepreciated
land and impairment write-downs of depreciable real estate, plus real estate related depreciation and amortization (excluding
amortization of deferred financing costs) and after adjustments for unconsolidated partnerships and joint ventures divided by (ii) weighted
average diluted common shares and OP units outstanding.
(64) AFFO / Share is defined as the
quotient of (i) adding to or subtracting from FFO the Company’s amortization of deferred financing costs and hedge amortization,
non-cash compensation, non-real estate depreciation, impairment charges, below market debt amortization, net straight line rent adjustments,
net amortization of above and below market leases, recurring capital expenditures, tenant improvements, capitalized leasing costs divided
by (ii) weighted average diluted common shares and OP units outstanding.
(7) Net Income / Share is defined as the quotient of (i) net
income (loss) (computed in accordance with GAAP) divided by (ii) weighted average diluted common shares and OP units outstanding.
(85) Unlevered Free Cash Flow is defined
as Adjusted EBITDA less stock-based compensation, capital expenditures, and changes in net working capital. Calculated by Evercore for
purposes of its discounted cash flow analysis based on financial forecasts and estimates provided by management.
The table appearing under the heading “Selected Public
Companies Analysis” in the second paragraph from the bottom of page 27 is amended and restated as follows:
Selected Companies
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|
TEV
|
|
|
Price
as of
November 12,
2021
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|
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TEV / 2022E Adj.
EBITDA
|
|
Price / 2022E
AFFO
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CyrusOne Inc.
|
|
$
|
14,099
|
|
|
$
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83.36
|
|
|
22.1x
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|
20.5x
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Cyxtera
|
|
$
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3,377
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|
|
$
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9.83
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|
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13.8x
|
|
N/A
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Digital Realty Trust, Inc.
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|
$
|
61,258
|
|
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$
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157.97
|
|
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23.8x
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|
23.3x
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Equinix, Inc.
|
|
$
|
82,928
|
|
|
$
|
836.91
|
|
|
24.5x
|
|
26.3x
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Switch, Inc.
|
|
$
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7,925
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|
|
$
|
25.65
|
|
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22.3x
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|
20.5x
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Company (Management estimates)
|
|
$
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9,946
|
|
|
$
|
147.79
|
|
|
26.7x
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|
27.8x
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Company (Street consensus)
|
|
$
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9,946
|
|
|
$
|
147.79
|
|
|
26.8x
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|
29.3x
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The second full paragraph under the heading “Precedent
Transaction Analysis” on page 28 is amended and restated as follows and the following table replaces in its entirety the
table appearing under the heading “Precedent Transaction Analysis” on pages 28 and 29:
The selected precedent transactions reviewed by
Evercore were, as well as certain publicly available valuation metrics for each transaction, are shown below:
Announcement
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Closing
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|
|
|
|
|
Total
Enterprise
Value
|
|
|
EBITDA
Multiple
|
|
|
AFFO
/
Share
Multiple
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|
Date
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|
Date
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|
Acquiror
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Target
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($ millions)
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|
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LTM
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|
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NTM
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NTM
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6/7/21
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8/31/21
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Blackstone Group
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QTS Realty Trust
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|
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8,564
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|
|
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27.2
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|
|
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24.8
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|
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28.8
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5/3/21
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|
6/7/21
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Switch
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Data Foundry
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|
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420
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|
|
|
-
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|
|
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20.9
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|
|
|
-
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3/17/21
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|
3/17/21
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Ascendas
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Digital Realty Trust (11 European Assets)
|
|
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680
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|
|
|
-
|
|
|
|
-
|
|
|
|
-
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|
9/29/20
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|
2/3/21
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|
DataBank
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zColo
|
|
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1,400
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
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8/10/20
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|
9/1/21
|
|
Equinix
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|
GPX Data Centers
|
|
|
161
|
|
|
|
-
|
|
|
|
15.0
|
|
|
|
-
|
|
7/7/20
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|
11/20/20
|
|
Colony Capital
|
|
Vantage Data Centers
|
|
|
1,500
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
6/1/20
|
|
10/1/20
|
|
Equinix
|
|
Bell Canada (13 Canadian Data Centers)
|
|
|
780
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
12/11/19
|
|
1/6/20
|
|
Colony Capital
|
|
DataBank
|
|
|
907
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
10/29/19
|
|
3/13/20
|
|
Digital Realty Trust
|
|
InterXion
|
|
|
8,377
|
|
|
|
25.2
|
|
|
|
21.7
|
|
|
|
-
|
|
10/4/19
|
|
1/9/20
|
|
Equinix
|
|
Axtel (3 Data Centers)
|
|
|
175
|
|
|
|
-
|
|
|
|
19.0
|
|
|
|
-
|
|
8/27/19
|
|
8/27/19
|
|
Shagang Group (China)
|
|
Global Switch (24% stake)
|
|
|
7,500
|
|
|
|
28.6
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|
|
|
-
|
|
|
|
-
|
|
5/8/19
|
|
7/26/19
|
|
Asterion Industrial Partners
|
|
Telefonica (11 data centers)
|
|
|
616
|
|
|
|
20.0
|
|
|
|
-
|
|
|
|
-
|
|
1/25/19
|
|
3/1/19
|
|
Berkshire Partners
|
|
Teraco Data Environments (Maj. Stake)
|
|
|
1,000
|
|
|
|
22.0
|
|
|
|
-
|
|
|
|
-
|
|
1/4/19
|
|
1/4/19
|
|
Brookfield Asset Management
|
|
DCI Data Centers
|
|
|
385
|
|
|
|
19.2
|
|
|
|
-
|
|
|
|
-
|
|
9/24/18
|
|
12/20/18
|
|
Digital Realty Trust
|
|
Ascenty
|
|
|
2,250
|
|
|
|
-
|
|
|
|
15.5
|
|
|
|
-
|
|
2/14/18
|
|
4/3/18
|
|
Equinix
|
|
Infomart (Dallas)
|
|
|
800
|
|
|
|
32.0
|
|
|
|
-
|
|
|
|
-
|
|
12/21/17
|
|
8/27/18
|
|
CyrusOne
|
|
Zenium Data Centers
|
|
|
442
|
|
|
|
-
|
|
|
|
24.6
|
|
|
|
-
|
|
12/18/17
|
|
4/18/18
|
|
Equinix
|
|
Metronode
|
|
|
792
|
|
|
|
-
|
|
|
|
21.1
|
|
|
|
-
|
|
12/11/17
|
|
1/10/18
|
|
Iron Mountain
|
|
IO Data Centers (US Operations)
|
|
|
1,315
|
|
|
|
-
|
|
|
|
16.7
|
|
|
|
-
|
|
6/9/17
|
|
9/14/17
|
|
Digital Realty Trust
|
|
DuPont Fabros
|
|
|
7,595
|
|
|
|
23.0
|
|
|
|
20.3
|
|
|
|
19.6
|
|
3/27/17
|
|
4/27/17
|
|
DBRG, PSP, TIAA Consortium
|
|
Vantage Data Centers
|
|
|
1,200
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
2/2/17
|
|
3/21/17
|
|
Stonepeak
|
|
Cologix
|
|
|
1,250
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
12/6/16
|
|
5/1/17
|
|
Equinix
|
|
Verizon (US / LatAm: 29 Data Centers)
|
|
|
3,595
|
|
|
|
-
|
|
|
|
13.3
|
|
|
|
-
|
|
11/4/16
|
|
5/2/17
|
|
BC Partners, Medina Consortium
|
|
CenturyLink Portfolio (57 Data Centers)
|
|
|
2,300
|
|
|
|
12.0
|
|
|
|
-
|
|
|
|
-
|
|
8/14/15
|
|
10/12/15
|
|
Digital Realty Trust
|
|
TelX
|
|
|
1,886
|
|
|
|
16.4
|
|
|
|
-
|
|
|
|
-
|
|
5/7/15
|
|
1/15/16
|
|
Equinix
|
|
Telecity
|
|
|
4,079
|
|
|
|
16.3
|
|
|
|
16.1
|
|
|
|
-
|
|
The final two paragraphs on page 29 and the first paragraph
on page 30, under the heading “Discounted Cash Flow Analysis”, are amended and restated as follows:
Evercore calculated ranges of terminal values for
the Company as of December 31, 2025 using the following two alternative methods:
|
·
|
a perpetuity growth method – under which Evercore calculated a range of terminal values for the Company by applying, based on
its professional judgment and experience, perpetuity growth rates that were appropriate for the Company as of December 31,
2025 given its business characteristics and the data center sector in which it participates, and that rangedranging
from 2.00% to 2.75%, to the estimate of 2025 unlevered free cash flow calculated based on the Projections; and
|
|
·
|
a terminal multiple method – under which Evercore calculated a range of terminal values for the Company by applying, based on
its professional judgment and experience, terminal multiples that were appropriate for the Company as of December 31, 2025
given its business characteristics and the data center sector in which it participates, and that rangedranging
from 22.0x to 26.0x to the estimate of 2025 Adjusted EBITDA reflected in the Projections.
|
Evercore derived ranges of implied
enterprise values for the Company by discountingdiscounted the Company’s projected, unlevered free
cash flows over the period from January 1, 2022 through December 31, 2025 and the ranges of terminal values for the
Company it calculated under each of the methods described above to present value as of December 31, 2021, using rates based on
Evercore’s judgment of the estimated range of the Company’s weighted average cost of capital of 6.25% to 7.25%,
to derive ranges of implied enterprise values for the Company. This range was based on Evercore’s indicative
calculation of the Company’s weighted average cost of capital of 6.78% as determined utilizing the capital asset pricing model
and using weekly adjusted betas sourced from Bloomberg for the two-year period ending November 21, 2021 for selected public
companies in the data center industry. From the ranges of implied enterprise values, Evercore then deducted the sum of
Company management’s estimate of the Company’s total debt as of December 31, 2021 of $1,822 million,
added Company management’s estimate of the Company’s cash as of December 31, 2021 of $4 million, and
divided the results by theCompany management’s estimate of the Company’s fully diluted
outstanding Shares as of December 31, 2021 of 49.0 million, in each case based on the Projections, to derive
ranges of implied equity values per Share as set forth below, which Evercore compared to (x) the value per Share implied by the
Merger Consideration of $170.00, (y) the closing price of the Shares on November 12, 2021, which was the last trading day
before the announcement of the Transactions, of $166.59 and (z) the closing price of the Shares on November 2, 2021, which
based on Evercore’s judgment was the last trading day before the share price of the Company was affected by market speculation
regarding a transaction involving the Company, of $147.79:
The third paragraph from the bottom on page 30, under the heading
“Analysts’ Price Targets Analysis”, is amended and restated as follows:
Evercore reviewed selected publicly available share
price targets of research analysts’ estimates known to Evercore as of November 12, 2021 shown in the table below,
noting that the low and high share price targets ranged from $126.00 to $170.00 per Share.
Broker
|
|
Date
|
|
Rating
|
|
Target
Price
|
|
Truist
Securities
|
|
11/09/21
|
|
Buy
|
|
$
|
170.00
|
|
Cowen
|
|
11/12/21
|
|
Buy
|
|
$
|
169.00
|
|
Berenberg
|
|
10/29/21
|
|
Buy
|
|
$
|
165.00
|
|
Credit
Suisse
|
|
10/29/21
|
|
Buy
|
|
$
|
158.00
|
|
MoffettNathanson
|
|
11/11/21
|
|
Buy
|
|
$
|
156.00
|
|
Evercore
ISI
|
|
10/29/21
|
|
Hold
|
|
$
|
154.00
|
|
Raymond
James
|
|
10/28/21
|
|
Buy
|
|
$
|
153.00
|
|
Stifel
|
|
11/09/21
|
|
Hold
|
|
$
|
145.00
|
|
JP Morgan
|
|
10/29/21
|
|
Sell
|
|
$
|
142.00
|
|
Jefferies
|
|
10/28/21
|
|
Hold
|
|
$
|
141.00
|
|
BMO Capital
Markets
|
|
10/31/21
|
|
Hold
|
|
$
|
140.00
|
|
Baird
|
|
11/04/21
|
|
Hold
|
|
$
|
136.00
|
|
RBC Capital
Markets
|
|
10/28/21
|
|
Hold
|
|
$
|
136.00
|
|
Wells
Fargo
|
|
11/10/21
|
|
Sell
|
|
$
|
135.00
|
|
Barclays
|
|
10/28/21
|
|
Sell
|
|
$
|
126.00
|
|
SIGNATURE
After due inquiry and to the best of my knowledge
and belief, I certify that the information set forth in this statement is true, complete and correct.
|
|
|
CORESITE REALTY CORPORATION
|
|
|
|
|
|
Date: December 20, 2021
|
|
|
By:
|
/s/ Jeffrey S. Finnin
|
|
|
|
Name:
|
Jeffrey S. Finnin
|
|
|
|
Title:
|
Chief Financial Officer
|
Cencora (NYSE:COR)
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Cencora (NYSE:COR)
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