Shareholder Challenges Pan Pacific/Kimco Deal
Sep 13, 2006 2:00 PM
When West Coast REIT Pan Pacific Retail Properties Inc. agreed to be acquired by Kimco Realty Corp. for $70 per share earlier this summer, analysts were surprised by seemingly low valuation, which they said did not reflect the company’s high credit rating and strong growth potential. The transaction price represented no premium to Pan Pacific’s stock price before the deal was announced.
Now, a class action has been filed on behalf of Pan Pacific shareholders by Jack G. Blaz, a Dallas-based shareholder representing an entity called Momentum Partners. The suit charges both Kimco and Pan Pacific with a breach of fiduciary duties and self-dealing on the part of Pan Pacific’s senior management.
In papers filed with the Baltimore County Circuit Court on Aug. 30, Blaz’ lawyers accuse Pan Pacific executives, including president and CEO Stuart Tanz, of rushing to complete the transaction with Kimco on terms that are unfavorable to Pan Pacific’s investors. The plaintiff believes the company completed sales negotiations with Kimco prior to the release of its Second Quarter 2006 financial report to ensure that Kimco got a discount on the purchase price. During the second quarter, Pan Pacific’s net operating income was $27.3 million, $0.67 per share, an 11.9 percent jump over the same period in 2005. Blaz was also dismayed to find that Pan Pacific did not attempt to get bids from several buyers and only pursued negotiations with Kimco.
When the deal was announced, some analysts interpreted the valuation as an indication that investors were losing their ardor for the retail sector. Also, as some analysts pointed out, Pan Pacific’s stock had rallied in the days before the deal was announced, as rumors spread that Kimco was on the verge of announcing a major acquisition; Pan Pacific was frequently mentioned as a target. The deal price, in fact, is about 7 percent above where Pan Pacific traded before the weeklong run-up.
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