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Key member of founding Ratner family steps up advocacy against Brookfield deal, argues Q3 results suggest Forest City is more robust than portrayed

Less than a week after urging Forest City Realty Trust shareholders to vote against an acquisition by Brookfield, former Forest City Enterprises CEO and co-Chairman Albert Ratner yesterday issued a press release (also at bottom) arguing that Forest City's recent strong third-quarter results were "Further Proof That Brookfield Deal Would Short-Change Shareholders."

The extended Ratner family owns about 10% of Forest City shares, but only Albert Ratner (1%) and current Chairman James Ratner (2.46%) have indicated their intention to vote against the deal. Given that two hedge funds owning nearly 14% of the company have signed onto the deal, which was approved by Forest City's board by 7-5, Al Ratner's advocacy seems more aimed at major institutional shareholders like Vanguard Group than family members. (Shareholders votes are due by Nov. 15.)

Ratner previously argued that Brookfield's accepted offer is only a slight premium over book value.

What do better days mean?

"The strong third quarter and nine-month results reveal a more favorable overall risk profile for Forest City, which begs the question, why did the Board agree to such a fire sale price? And shouldn't the proxy be amended to include current events, and to refresh the projections and NAV [net asset value] estimates to reflect these results?" he asked.

He also noted that Forest City shareholders, who are no longer receiving dividends, will not receive the benefit of net earnings exceeding $715 million in the first three quarters, which was nearly seven times more than the previous year's results.

"When did the Forest City Board of Directors first know that the Company's net earnings for the first nine months of the year were going to be so favorable?" Ratner asked. "Why did the Directors agree to a deal under which shareholders would be forfeiting to Brookfield significant earnings that rightly belong to them?"

He noted that Forest City's "significant reduction in leverage," meaning fewer loans outstanding, could be used to help shareholders, "but instead will benefit Brookfield by allowing it to borrow $4.25 billion off of the company's balance sheet to fund over 60% of the purchase price for the company's own assets."

Previous statistics, he said, portrayed the company at greater risk than it is now, which means the board should have driven a better deal.