Shareholders say they will vote against Colony NorthStar REIT plans

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NorthStar Asset Management Group's largest shareholders on Monday said they would not vote for the company's current plans to merge with private equity firm Colony Capital and commercial real estate company NorthStar Realty Finance Corp. to become a real estate investment trust named Colony NorthStar.

MSD Partners, MSD Capital and their affiliates, in an open letter to a special committee of NSAM's Board of Directors, said that the combination as currently proposed “does not provide sufficient value to NSAM's stockholders” and that the proposed governance structure “will hinder the interest of all three companies' stockholders in achieving the type of full valuation for the combined company that is rightfully accorded to public companies with the highest governance standards and with the best possible management alignment with shareholders.”

MSD Partners, MSD Capital and their affiliates collectively own approximately 10.2% of  NSAM's outstanding common stock, or more than 19.2 million shares, according to the letter.

“As the company's largest stockholder, we expect you to provide the oversight necessary to ensure that NSAM's management is focused solely on value maximization for all stockholders, and that you will not allow any conflicts of interest, especially those that might arise from the potential triggering of severance and change of control payments, to impair what is in the best interests of NSAM and all of its stockholders,” the letter stated.

Bloomberg said that under proposed terms of the merger agreement, departing executives at both NorthStar businesses would receive “golden parachute” payments of as much as $223 million.

MSD Capital is a private investment firm that manages the capital of Michael Dell, the founder, board chairman and CEO of Dell Inc., and the capital of his family. MSD Partners was formed in 2009 to enable a select group of investors to invest in MSD Capital strategies.

Jonathan Litt, founder and chief investment officer for registered investment manager Land and Buildings, also has been a vocal critic of the proposed merger. In a Sept. 14 letter to NSAM shareholders, he said that consideration to NSAM shareholders should be at least $2.9 billion, not the $2.4 billion currently proposed; that several “improvements” to corporate strategy and governance are necessary for the deal to be in best interests of all shareholders; and that better alternatives to the currently structured merger exist for NSAM shareholders.

NSAM did not respond to a request for comment made by McKnight's Senior Living.

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