Melville-based Reckson Associates Realty Corp. defends $6B sale

Long Island Business News, Aug 10, 2006 by Dawn Wotapka Hardesty

Since Reckson Associates Realty Corp. announced its $6 billion sale to SL Green Realty Corp. last week, some shareholders have criticized what they consider a sweetheart deal.

This week, Melville-based Reckson released a 24-page overview detailing why it's not.

Under the deal, SL Green will acquire Reckson for $43.31 and .10387 shares of SL Green Common stock per share of Reckson stock. SL Green will keep Reckson's valuable Manhattan trophies and sell back the company's Long Island and New Jersey portfolios, and parts of Reckson's Westchester holdings, for $2.1 billion. The sell-back deal also includes Marathon Asset Management, a Manhattan equity firm.

SL Green's contract includes a 3-percent break-up fee, meaning Reckson would be out millions should the deal fizzle. One analyst said the industry average is 2 percent.

Despite the ire of some of Reckson's largest shareholders, some of whom had speculated Reckson would fetch near $50 per share, the deal should continue, Reckson reasons.

Goldman Sachs and Citigroup led a "comprehensive auction process" to solicit bids and contacted eight likely bidders - and no combination of bidders was willing to pay more than SL Green's final offer, "a valuation it was only able to achieve with management participation," according to Reckson.

Reckson management, the overview continues, "considered all reasonable alternatives to deliver full value to shareholders."

John Stewart, a Credit Suisse research analyst, agreed.

"SL Green is paying a full - but fair market - price for Reckson, and the probability of closing is high, in our opinion," Stewart noted in a report. "The deal was widely shopped, and a higher bidder is unlikely."