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Forest City Realty Trust shareholders, by significant margin, approve acquisition by Brookfield

Despite the significant questions raised by former CEO and co-Chairman Al Ratner, a lawsuit, as well as a deeply divided board, Forest City Realty Trust shareholders, in votes totaled yesterday, weren't swayed from approving an acquisition by Brookfield Asset Management.

So when the acquisition is completed, by 12/10/18, it will mark the end of a standalone company founded in 1920, as Forest City will become a part of a much larger corporation.

As detailed in previous articles, Forest City was considered undervalued, due to the complexity of its business, an atypical corporate structure (for most of its existence, not a real estate investment trust, or REIT), and a two-class share structure that left the founding Ratner extended family in control.

That share structure and a family controlled board was looked at critically by experts in corporate governance. Over the last few years, Forest City streamlined its operations, for example lowering debt and risk, turned over some board seats, gave up that share structure, and pursued a "strategic review" to enhance value.

That led not to a sale, though Brookfield was a suitor, but a new board, as Forest City--perhaps unwisely--chose not to fight activist hedge funds that were pushing to revamp the board. The new board, in a narrow 7-5 vote, agreed to sell to Brookfield.

In the past few years, Forest City, both nationally and in New York, has pursued fewer ambitious new projects but rather has been an operator of existing real estate. It nearly completely exited from Atlantic Yards, a signature project that, as I wrote, turned out to be an albatross. More on the history of Forest City Ratner, the New York subsidiary, now called Forest City New York, from my article this past March.

The statement

 A press release today, the text below in full, from Forest City Realty Trust:
Forest City Stockholders Approve Acquisition by Brookfield Fund
CLEVELAND, Nov. 15, 2018 /PRNewswire/ -- Forest City Realty Trust, Inc. ("Forest City") (NYSE: FCEA) today announced that its stockholders approved the acquisition of Forest City by a real estate investment fund of Brookfield Asset Management Inc. ("Brookfield") (NYSE: BAM) (TSX: BAM.A) (Euronext: BAMA) at its special meeting of stockholders held today, pursuant to the merger agreement dated July 30, 2018. 
With the approval by Forest City stockholders, Forest City expects that the acquisition will be completed in December on or prior to December 10, 2018, subject to the satisfaction or waiver of the remaining closing conditions. Forest City does not expect to declare or make any pre-closing dividends or distributions. 
Lazard and Goldman Sachs & Co. LLC are acting as financial advisors to Forest City and Sullivan & Cromwell LLP is acting as legal counsel. Wachtell, Lipton, Rosen & Katz is acting as legal counsel to the Forest City Board of Directors.
In favor, 67.4% of shareholders, 84% of those voting

In a Form 8-K report to the Securities and Exchange Commission, Forest City offered some numbers:
271,152,840 shares were entitled to vote, while 218,123,369 shares were represented in person or by proxy, thus making a quorum.

For the merger, there were 182,816,474 "Yes" votes,  34,468,148 "No" votes, and 838,747 abstaining. So meant approval from 67.4% of shareholders, and nearly 84% of those voting. A similar margin approved compensation arrangements, aka "golden parachutes."

A low-key special meeting

The Cleveland Plain Dealer's Michelle Jarboe described the meeting as "a no-fanfare affair"--as in the past, there were no questions or comments. Al Ratner didn't show.

CEO David LaRue, who changed his vote so the board could, by a 7-5 vote, advance the merger (and his golden parachute) called it bittersweet but said, "I'm pleased that the company is going to be able to move forward," Jarboe reported.

LaRue said that he has "the highest amount of respect for the company, for the family, for the history." I have to suspect that some members of the founding family might disagree, given that Al Ratner described LaRue's vote switch--which enabled the board to advance the Brookfield acquisition, 7-5--as an "apparent quid pro quo."

Ratner, who filed a lawsuit trying to stall or unwind the vote, was stymied at the first pass. Given that a judge said there wasn't sufficient likelihood that he'd prevail on the merits to justify a stay, a victory in the long run seems less likely. Nevertheless, the whole sale process will be seen as having significant question marks.