A couple of things are quite unusual about this cash and stock merger bid to acquire Fisher Communications. But while Huntington REIT has been rebuffed by Fisher’s board of directors, Huntington has gone public in hopes of putting shareholder pressure on the board.
So what’s so unusual? First off, Huntington is a Canadian company – a real estate investment trust based in Richmond, British Columbia whose shares are traded on the Toronto Stock Exchange. RBR-TVBR sent Huntington President Zachary George an email asking how he intends to deal with the FCC limits on foreign ownership of US broadcast licenses.
Here is his response: “Given the nature of this process, I am restricted as to what I can say at this point. I assure you that we have spent significant time and resources considering the issues that you raise.” George did confirm that he is a US citizen – he was born in Texas and holds dual US and Canadian citizenship.
What is also unusual is that Huntington is, as its name implies, a real estate investment trust. It owns 75 commercial real estate properties and derives its income from rental receipts. It has also been selling some non-core properties. Its holdings include office, industrial, retail and standalone parking lot properties, including the aviation-related facilities at five major international airports in Canada. It doesn’t list any current holdings in media and George did not respond to our question of why Huntington is now interested in media.
Fisher does have one significant real estate asset, Fisher Plaza in Seattle, but that is a relatively small part of its business compared to its TV and radio stations.
Huntington disclosed Monday (1/3) that it made a proposal December 6, 2010 to acquire Fisher for $23.99 per share, either for 3.58 units of Huntington (the REIT securities are called units rather than shares) each or 1.79 units and $12 in cash. Fisher’s stock closed December 6th at $20.30.
The offer values Fisher’s stock in total at a bit over $210 million. Add in the company’s debt to be assumed and it values Fisher at over $315 million.
Fisher, it should be noted, has a considerable cash hoard in its corporate coffers. It is still sitting on over $40 million in cash, primarily from the sale of its Safeco Insurance stock in 2008.
According to Huntington, Fisher’s board turned down its offer just four days later, on December 10th, saying the merger was not in the best interest of Fisher and its shareholders.
Late Monday (1/3) Fisher made a public response to Huntingdon and revealed that one of its own directors has close ties to the unwanted suitor. Click here to read this related story.
Here is the letter that Huntington made public on Monday:
January 3, 2011
Board of Directors
Fisher Communications Inc.
140 4th Avenue North
Seattle, Washington 98109
Michael D. Wortsman,
Chairman of the Board of Directors
Ladies and Gentlemen:
We refer to our letter of December 6, 2010, addressed to Colleen B. Brown, the President and Chief Executive Officer of Fisher Communications, Inc. (“Fisher”), and also sent to each of you. In that letter we proposed a business combination between Fisher and Huntingdon Real Estate Investment Trust (“Huntingdon”) at a valuation that would provide Fisher shareholders with cash and stock in Huntingdon at a substantial premium to Fisher’s current stock price.
We are astonished that only four days later — without any communication with Huntingdon or its advisors — the Fisher board by letter dated December 10, 2010, rejected our proposal. Equally astonishing is the complete absence in that letter of any attempt to explain on what basis the Fisher board reached its conclusion that the proposal is not in the best interest of Fisher and its shareholders. While we appreciate the board’s willingness to promptly consider our proposal — even though we set no deadline in our letter — we cannot understand how your analysis and rejection of our proposal, conducted without any discussion with us and with such unseemly haste, show a due regard for the proper exercise of the board’s obligation to undertake fully informed deliberation about a matter of such importance to Fisher and its shareholders.
Since you have made your opposition to our proposal clear, and by your actions foreclosed the possibility of direct negotiations at this time, Huntingdon has concluded that it must make the terms of its proposal public so that Fisher shareholders can make their own assessment of the sufficiency of our proposal. Under our proposal, Huntingdon would acquire all of the outstanding shares of Fisher common stock and Fisher shareholders would have the option of taking either (1) 3.58 units of Huntingdon for each Fisher common share or (2) 1.79 units of Huntingdon and $12 in cash for each Fisher common share. The other terms of our proposal remain as stated in our December 6th letter. We continue to believe that our proposal is an attractive one for Fisher shareholders. The offer implied a value of $23.99 per share based on Huntingdon’s December 3rd closing price of $6.70, an approximate 18% premium to the Fisher closing price on December 3 and a 25% premium to Fisher’s volume weighted average price for the preceding month.
We believe that Huntingdon represents an attractive investment for Fisher shareholders as it currently trades at a material discount to its book value, peer group and comparable market values. We have retained Brookfield Financial to serve as Huntingdon’s financial advisor on this transaction and Kramer Levin Naftalis & Frankel LLP as our legal advisor and we have already purchased a significant amount of Fisher common shares.
We ask that you reconsider your hasty decision to reject our proposal. We urge you to begin discussions through our respective financial and legal advisors to establish a process by which you can inform yourselves about the terms of our proposal and we can assess whether those terms can be enhanced as we conduct confirmatory due diligence. We also strongly suggest that you consult with Fisher’s shareholders about their views as to both the merits of our proposal and proper process for evaluating it.
President and Chief Executive Officer
Chairman of the Special Committee
Chairman of the Board of Trustees
RBR-TVBR observation: Maybe Bill Gates sold his Fisher shares too soon. The Huntington bid gave Fisher’s stock a boost early Monday, jumping to $23 at the opening bell from Friday’s close of $21.80. After dropping back, the stock surged above $23 in later trading. We would caution that this deal would face significant regulatory hurdles if the Canadian REIT were to strike a deal to acquire the US broadcaster – not to mention that the powers that be at Fisher are not inclined to do such a deal.