What’s the real deal between Blackstone and BioMed Realty?
In October 2015, Blackstone Group entered into an agreement with BioMed Realty Trust (BMR) to acquire all its outstanding shares of common stock for $23.75 per share in a transaction valued at $8 billion. Blackstone acquired BioMed Realty at a premium of 24% over the closing stock price as on September 22, 2015, the day on which the deal was made public. BioMed Realty’s Board of Directors unanimously approved the transaction. Blackstone Group is the world’s largest private-equity firm and is a leader in real estate investing throughout the world.
The transaction is expected to be completed in the first quarter of fiscal 2016. BioMed Realty’s shareholders will receive a per diem of approximately $0.003 per share for each day from January 1 till the closing of the deal. The SPDR Dow Jones Wilshire REIT ETF (RWR) invests about 0.8% of its portfolio in BioMed Realty.
BioMed Realty’s management seems bullish
The management of BioMed Realty painted a bullish picture on the deal with Blackstone. Alan D. Gold, Chairman, President, and Chief Executive Officer of BioMed Realty stated that, “We believe that the public markets are not adequately valuing our assets and proven business model,” adding that “entering into this transaction with Blackstone fulfills our Board of Directors’ mission to maximize stockholder value.”
Interpreting the implications
BioMed Realty is trading at a discount compared to most of its peers due to lower occupancy and relatively slower growth despite being present in the niche segment of life science properties. In addition, the company’s asset quality is not the best in the industry.
That said, the life science industry has been growing rapidly since the past few years generating huge demand for unique properties. The long-term fundamentals of the company look brighter that attracted Blackstone to BioMed Realty, and the deal with the Blackstone will likely help BioMed shore up its cash flows to acquire attractive properties in order to improve its portfolio quality and hence the net operating income.
But would this be fair to shareholders?
Some of the firms have raised concerns over the deal and are investigating the Board of Directors of BioMed Realty of undervaluing the company to the detriment of BioMed’s shareholders. They opined that the offer is inadequate as the company’s stockholders will receive only $23.75 per share compared to its January high of $25.11.
The market is expected to witness more takeovers in the REIT (real estate investment trust) segment in the years to come. Some smaller companies of the size of Columbia Property Trust (CXP), Hudson Pacific Properties (HPP), and Brandywine Realty Trust (BDN) might also be on the attentive investor’s radar.
Continue to the next part for a discussion on BioMed Realty’s occupancy level.