MPG, Brookfield respond to preferred shareholder lawsuit by delaying closing of tender offer, merger

By Toni Weeks

San Luis Obispo, Calif., July 11 - A preferred shareholder of MPG Office Trust, Inc. has filed a class action lawsuit challenging the proposed merger between MPG and affiliates of Brookfield Office Properties Inc. and Brookfield's open tender offer for all of MPG's 7.625% series A cumulative redeemable preferred shares.

The tender offer was scheduled to close on July 17. MPG's common shareholders are voting on the merger on that day as well.

The shareholder is requesting an injunction preventing the closing of either transaction until they are restructured to comply with the contract for the preferreds. A hearing is scheduled for July 25. MPG and Brookfield have agreed not to close the merger or the tender offer until the Circuit Court of Baltimore City, Md., rules on the request.

On April 25, MPG and Brookfield announced the planned merger and Brookfield's tender offer for all of MPG's outstanding preferreds. According to the release, MPG has not paid any dividends to its preferred shareholders since 2008. Under the contract governing the preferreds, the company owes more than $9.00 per share in accrued dividends to preferred shareholders.

Brookfield's tender offer pays nothing to the preferred shareholders for the accrued dividends. Shareholders who do not participate in the tender offer will have their preferred stock canceled and converted into new preferred stock of a Brookfield-controlled entity, and Brookfield will decide whether to pay any of the accrued dividends to these non-tendering shareholders.

In the class action lawsuit, preferred shareholders allege that the tender offer and merger, as structured, violate the contract governing the preferred stock, because the contract promises that preferred shares will not be converted without shareholder consent. The plaintiff alleges that the tender offer is "wrongfully coercive and unlawful," because shareholders are forced to choose between tendering their shares, foregoing the $9 in dividends, or converting their shares into Brookfield shares.

Brookfield is a commercial real estate company with corporate offices in New York, Toronto and Sydney, Australia. Los Angeles-based MPG is an owner and operator of class A office properties in the Los Angeles area.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.