All Three Leading Independent Proxy Advisory Firms Recommend Shareholders of Diversified Healthcare Trust Vote AGAINST the Proposed Merger with Office Properties Income Trust
August 21 2023 - 4:45PM
Business Wire
ISS, Glass Lewis, and Egan-Jones Have Concluded
the Proposed Merger Does Not Represent
the Best Path Forward for DHC Shareholders
Egan-Jones Agrees There are Superior
Alternatives for Maximizing Shareholder Value and Addressing the
Company’s Near-Term Debt
Visit www.SaveDHC.com to Obtain Information on
How to Vote AGAINST the Deal on
the GOLD Proxy Card Ahead of
the August 30th Special Meeting
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 9.8% of the
Company’s outstanding common shares, today announced that all three
independent proxy advisory firms – Institutional Shareholder
Services Inc. (“ISS”), Glass, Lewis & Co. (“Glass Lewis”), and
Egan-Jones Ratings Company (“Egan-Jones”) – have now recommended
that DHC shareholders vote AGAINST the proposed merger with Office
Properties Income Trust (Nasdaq: OPI) (“OPI”) at the Company’s
upcoming Special Meeting of Shareholders (the “Special Meeting”) on
August 30, 2023.
Marc Andersen, Managing Member of FFL, commented:
“The unanimous recommendations from all three proxy advisory
firms to vote AGAINST the
DHC-OPI deal confirm that there are many viable alternatives for
the Company and its shareholders. As a significant investor in DHC,
we want to support the Board of Trustees in exploring superior
paths that would benefit all stakeholders, including moderating
capital expenditures, targeted asset sales, and pursuing
non-dilutive financing options. That is why we continue to believe
voting down this deal is the best first step, as it will allow DHC
to focus on the full potential of its valuable senior housing
operating portfolio to create long-term value for
shareholders.”
In its recently issued report, Egan-Jones highlighted its
rationale for recommending shareholders vote AGAINST the proposed merger:1
- “We believe that the proposed transaction with OPI is not
the best available strategic alternative to maximize
shareholder value and address its debt.”
- “The inadequacy of the merger consideration clearly depicts the
lack of alignment of the Board and management’s interests with
those of the shareholders.”
- “The absence of a strategic process, lack of synergies and
dubious rationale that favor RMR instead of DHC shareholders
[…] delineate that the proposed transaction is self-serving to the
personal motives of RMR and Mr. Portnoy.”
- “Given DHC’s SHOP assets, we believe that the Company is
poised for a sizable rebound in the next two years. We also
believe that the potential of DHC’s SHOP assets was completely
overlooked in determining the true value of its stock
price.”
In its recommendation AGAINST the deal, ISS noted the flawed
rationale, lack of process, and remarkable “take-under”
consideration:2
- “As of Aug. 2, 2023, the value of the merger consideration
represents a take-under at a meaningful 53.7 percent discount to
DHC’s closing price.”
- “[…] the company could potentially pay off all of its
outstanding unsecured debt, with a sizeable amount of assets
remaining at a value well above the company's current trading price
and the merger consideration […] shareholders may question why
they should support a merger at such a depressed valuation to the
company's stated asset value.”
- “[…] the lack of a competitive sales process or evidence
that the company exhausted all refinancing opportunities,
coupled with the inherent conflicts of interest with OPI and
RMR, make it difficult for shareholders to believe that the
proposed merger is in fact the best option.”
Glass Lewis also recommended shareholders vote AGAINST the deal in its report that
noted:3
- “[…] concerns with the current transaction, including a limited
and questionably structured process, a dubious structural rationale
and what appear to be markedly unfavorable terms for DHC
shareholders.”
- “We believe investors should readily question the board’s
apparent disinclination to firmly eliminate prospective conflicts
of interest, real or perceived, in connection with a related
party transaction involving another entity managed by RMR […]”
- “[…] the underlying industrial logic appears deeply flawed,
with few obvious synergies between DHC’s senior housing
portfolio and OPI’s existing office property exposure. The lack
of a compelling structural fit is demonstrated […]”
***
Visit www.SaveDHC.com to
Download FFL’s Investor Presentation and to Obtain
Information on How to Vote the GOLD
Proxy Card AGAINST ALL of DHC’s
Proposals at the Upcoming Special Meeting.
***
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 Permission to quote Egan-Jones was
neither sought nor obtained. Emphases added. 2 Permission to
quote ISS was neither sought nor obtained. Emphases added. 3
Permission to quote Glass Lewis was neither sought nor obtained.
Emphases added.
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version on businesswire.com: https://www.businesswire.com/news/home/20230821555933/en/
Flat Footed LLC ir@flatfootedllc.com
Okapi Partners LLC Mark Harnett (212) 297-0720
mharnett@okapipartners.com
or
Longacre Square Partners Greg Marose / Charlotte Kiaie,
646-386-0091 FFL@longacresquare.com
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