In response to a rejected offer from retail REIT peer Wheeler Real Estate Investment Trust (WHLR 10.08, -0.09 -0.9%), shares of Cedar Realty Trust (CDR 6.08, +0.02 +0.3%) have come off earlier highs yet still hold onto modest gains. Later, in a response to Cedar, Wheeler stated that its correspondence did not include an offer, and that its correspondence with Cedar was simply a request for a meeting to discuss methods to enhance shareholder value, including possible acquisition opportunities.
This morning in a press release, CDR announced that it had received and unanimously rejected an unsolicited and unrealistic proposal from Wheeler to evaluate opportunities to combine the two companies. The Cedar Board of Directors fully reviewed Wheeler's unsolicited proposal in consultation with its advisors and unanimously concluded that it is not in the best interest of shareholders for Cedar to enter into discussions with Wheeler.
The offer, which was encouraged by a newer Cedar shareholder – Snow Park Capital – was rejected on the grounds that Wheeler has regularly missed analyst estimates, including most recently in the third quarter of 2017.
Cedar also called attention to Wheeler’s size, stating Cedar is a $1.35 billion company, with a current equity market capitalization of about $550 million. In contrast, Wheeler is a $375 million company with a current equity market capitalization of about $95 million. While there are instances where relative size differences may not matter, the above factors demonstrate that in the instant case, the size differences would be adversely consequential.
Additionally, Cedar highlighted Wheeler’s trouble with its balance sheet, with debt to EBITDA of nearly 10 times. The company also brought into question Wheeler’s portfolio.
Then in a response moments ago, Wheeler refuted Cedar's insinuation that the company had offered to purchase Cedar. In fact, Wheeler stated that it sent a letter to Cedar's Board of Directors suggesting that representatives of Wheeler and Cedar meet to discuss possible methods to enhance shareholder value in both companies. Wheeler's staunchly stated that its correspondence did not include an offer.
As a bit of background, in a press release dated October 25 Snow Park Capital implored Cedar to explore strategic options. At the time, Snow Park estimated that Cedar’s NAV was $7.00 to $8.25 per share (about 7.10% - 6.55% implied cap rate), representing about 25 - 50% premium over current trading price.
Ahead, CDR should report 4Q17 earnings in the beginning of March 2018 with its Annual General Meeting scheduled for some time in early-May, but no dates have been formally announced for either.