NorthStar Asset Management Group, private equity firm Colony Capital and commercial real estate company NorthStar Realty Finance are on track to close on their merger plans in January, the companies announced Monday.
Responding to shareholder concerns, the three entities have adopted a new “shareholder-friendly” corporate governance structure for the combined company, which will be named Colony NorthStar, and also agreed to amend the terms of the merger agreement that was announced on June 3.
“NorthStar and Colony have made some very important improvements to the terms and proposed structure of the merged company,” MSD Capital and MSD Partners said in a statement. “The governance changes assure greater alignment with shareholders and we believe they will better position the new Colony NorthStar for future growth.”
Together, MSD Capital L.P. and MSD Partners L.P. own approximately 10.2% of NSAM’s outstanding shares and have agreed to vote in favor of the transaction.
Under the changes, Colony NorthStar’s board will include two new independent directors and a total of 10, three fewer than previously planned. The plan also gives some shareholders more power, enabling them to call special meetings of stockholders, remove and replace directors by majority vote, fill director vacancies and amend bylaws.
Stockholder approval will be required to increase the number of shares available for issuance, and directors will be required to maintain stock ownership equal to four times their annual cash retainer.
“The management of NSAM, CLNY and NRF believe that having a shareholder-focused corporate governance structure will enhance Colony NorthStar’s business and value to stockholders,” according to a press release from the companies, which provides additional details.
Pre-closing NSAM stockholders will receive a special cash dividend of $228 million (approximately $1.16 per share), an increase of $100 million above the $128 million special cash dividend originally proposed and in addition to NSAM’s regularly scheduled dividend payable in November.
David Hamamoto, current executive chairman of NSAM and chairman of NRF, who will be executive vice chairman of the combined entity, agreed to submit his resignation as a director of Colony NorthStar if his equity interest in Colony NorthStar falls below 50% of his equity interest as of the closing of the transaction.