Strategic Storage Growth Trust Urges Rejection of $10.00 Tender Offer
Strategic Storage Growth Trust Inc. advised its stockholders to reject MacKenzie Capital Management LP’s unsolicited attempt to acquire an up to 1.9% stake in the self-storage real estate investment trust at a price of $10 per share.
According to the REIT, MacKenzie Capital is attempting to capitalize on the temporary suspension of the company’s share redemption program through the offer. It added that stockholders could receive over 20% more than MacKenzie Capital’s offer if stockholders approve the $12-per-share takeover proposal of Strategic Storage Trust II Inc., which was unanimously recommended and approved by the Strategic Storage Growth Trust board.
Strategic Storage Growth also warned its stockholders that it cannot verify if MacKenzie Capital has the funds to cover the cost for the acquisition of shares that may be tendered for the offer, which was noted to be about 16% less than the current $11.58-per-share estimated value of its common stock.
In a letter to shareholders on October 18, the REIT’s board stated:
“We recently became aware of an unsolicited attempt by MacKenzie to acquire up to 1.9% shares of our common stock for $10 per share, reduced by all dividends paid by us on the Shares after October 3, 2018 (the “MacKenzie Offer”). After careful evaluation, the Board unanimously recommends that you reject the MacKenzie Offer and ignore the materials that were sent to you by MacKenzie.
The following are a list of important considerations:
• As admitted by MacKenzie, it is making the offer “in view of making a profit.” MacKenzie is a for profit business that, among other things, capitalizes on the illiquidity of shares by buying shares at what MacKenzie believes is a discounted price in order to make a profit. The MacKenzie Offer indicates that MacKenzie believes that our shares will be worth more in the future. Neither we nor any of our affiliates is in any way affiliated with MacKenzie.
• We believe the MacKenzie Offer is an attempt to capitalize on the recent temporary suspension of our share redemption program (the “SRP”). We temporarily suspended the SRP as we were evaluating strategic alternatives. In fact, we recently announced the successful execution of a merger agreement with one of our affiliates. Please read the bullet immediately below.
• It was recently announced that we have entered into a definitive merger agreement with Strategic Storage Trust II, Inc., which, if consummated on its present terms, would result in you receiving $12.00 per share in cash in accordance with the terms of the merger agreement. The Board, including each independent member of the Board, unanimously approved the merger and recommends the stockholders to do the same. The merger consideration is notably over 20% more than the MacKenzie Offer. We encourage you to read more about the potential merger in our SEC filings and other materials, which may be accessed on the SEC’s website (www.sec.gov), at our website (www.strategicreit.com/site/ssgt) or at the address provided below:
https://www.sec.gov/Archives/edgar/data/1575428/000119312518289919/d630246d8k.htm
• The Company’s estimated value per share for the Company’s common stock (the “NAV”) is currently $11.58. Although this does not represent the price that a stockholder could obtain in the open market, or otherwise, the NAV is approximately 16% more than the MacKenzie Offer.
• According to MacKenzie, they merely “attempted to establish a value for the [Company’s] real estate assets,” which is in contrast to the rigorous methods used by the Company in developing its NAV, including the engagement of an independent third-party appraisal firm.
• The Board has significant knowledge of the Company and its assets, and based upon the historical financial data disclosed in the Company’s Form 10-Q and Form 10-K filings over the past several quarters, there are positive trends, which indicate that the MacKenzie Offer undervalues the per share value of the Company.
• Even if a stockholder were to take advantage of the MacKenzie Offer, the Board cannot verify that MacKenzie actually has the funds to make a payment for any or all of the shares that may be tendered.
The Securities and Exchange Commission has cautioned investors about the heightened risks involved with offers such as the MacKenzie Offer. In addition to this letter, we strongly encourage you to read the information provided by the SEC, here (www.sec.gov/investor/pubs/minitend.htm) and here (www.sec.gov/rules/interp/34-43069.htm). The SEC makes the following admonitions:
• If the offer is for less than 5% of a company’s shares, it is a “mini-tender offer” and “you should proceed with caution.” The MacKenzie Offer is for up to 1.9% of our shares. Thus, it is a mini-tender offer, and you should proceed with caution.
• “Some bidders make mini-tender offers at below-market prices, hoping that they will catch investors off guard.”
• “[I]nvestors typically feel pressured to tender their shares quickly without having solid information about the offer or the people behind it. And they’ve been shocked to learn that they generally cannot withdraw from mini-tender offers.”
• “[M]ini-tender offers typically do not provide the same disclosure and procedural protections that larger, traditional tender offers provide.” For example, once you complete the assignment form, you have no right to change your mind and withdraw from the offer, even if the MacKenzie Offer is extended. We believe the materials provided along with the MacKenzie Offer fail to adequately address certain matters, such as: a complete description of the risks associated with the MacKenzie Offer; a clear discussion of the methodologies used by MacKenzie to determine its offer price or how it has valued the Company’s shares; completeness of disclosure as to the identity of MacKenzie, its control persons and promoters and their financial wherewithal; and a clear disclosure of the Company’s shares owned by MacKenzie and its affiliates.”
Sources: SEC, Strategic Storage Growtth Trust, Inc.
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