Before agreeing to a merger with Jacksonville-based Regency Centers Corp., Equity One Inc. was looking into possible deals that would take the shopping center developer private.
But when Regency Chairman and CEO Hap Stein suggested to Equity One’s chairman that a merger “would create a ‘must own’ shopping center REIT,” Equity One began negotiating with Regency, according to a preliminary proxy statement filed for the merger.
Regency and New York-based Equity One agreed in November to a $4.6 billion merger in which Regency will be the surviving company and continue to be headquartered in Jacksonville.
Both Regency and Equity One are real estate investment trusts, or REITS, that specialize in developing and operating shopping centers anchored by grocery stores.
The proxy statement filed with the Securities and Exchange Commission said Equity One Chairman Chaim Katzman and CEO David Lukes began talking with institutional investors about a cash buyout in 2015 “following a significant level of acquisition activity in the REIT industry.”
However, Equity One never received an offer from those investors.
Katzman is also chairman of Gazit-Globe Ltd., an Israel-based company that owns or has significant investments in several international grocery-anchored shopping center developers. It owns 34 percent of Equity One.
Stein and Katzman “became acquainted at industry events” but had never discussed a merger of Regency and Equity One before mid-2016, the proxy said.
However, Barclays Capital, a financial adviser for Equity One, suggested to Katzman in early 2016 that Regency might be interested in a merger.
In June 2016, Stein did call Katzman to see if he would be interested in a merger and while no offer was made, the two “shared their positive views on the two companies and their respective portfolios,” the proxy said.
The combined company would have a portfolio of 429 properties across the country. Stein told Katzman at a meeting later in the month it would be a “must own” REIT for investors.
Those talks led to negotiations that resulted in the November agreement. Equity One stockholders will receive 0.45 shares of Regency for each of their shares under the agreement.
Current Regency shareholders will own 62 percent of the merged company but Gazit-Globe will be the largest individual stockholder with 13.2 percent of the stock.
Regency’s current senior management will remain intact after the merger. Katzman, who will become vice chairman, and two other current Equity One directors will have seats on Regency’s 12-member board of directors.
The company has not said if Lukes and other Equity One officers will join Regency.
The merged company would have reported revenue of $750 million in the first nine months of last year and net income of 75 cents a share if the merger had been completed, lower than Regency’s reported earnings of 88 cents a share before the merger, according to the proxy.
Regency, like other REITs, usually uses funds from operations as its key operating metric, instead of earnings per share. Funds from operations are basically earnings excluding non-cash charges such as depreciation and amortization expense.
The proxy said Regency expects the merger to be “accretive” to its FFO per share, but the pro forma financials for the merged company did not include any FFO data.
Shareholders of both companies will need to approve the deal at separate special meetings, but the dates of those meetings have not been set. The companies hope to complete the merger in the second quarter of this year.
GEE Group records profit
GEE Group Inc. reported earnings of $1 million for the fourth quarter and net income of $1.2 million, or 12 cents a share, for the full fiscal year ended Sept. 30, reversing losses in fiscal 2015.
The staffing company, formerly known as General Employment Enterprises, grew revenue by 91 percent to $83.1 million for the fiscal year, mainly because of acquisitions.
“We made excellent progress implementing changes to obtain operational efficiencies and to lower selling, general and administrative expenses as a percentage of revenue,” Chairman and CEO Derek Dewan said in a news release.
“Additionally, with the company’s improved financial position and relative size we expect new and enhanced opportunities to obtain increased financing to help accelerate our acquisition strategy in the near term,” he said.
GEE Group is headquartered in the Chicago suburb of Naperville, Ill., but has been run by Jacksonville executive Dewan since April 2015. Although Dewan remains based in Jacksonville, the company has not indicated any plan to move its corporate headquarters.
Its annual report says the company leases 5,000 square feet for its headquarters under a lease that expires in 2018.
St. Augustine firm in proxy fight with board
The former CEO of a St. Augustine publicly traded company has launched a proxy fight against the current board of directors after losing his job the previous year.
According to SEC filings over the past month, Brian Pappas was terminated as CEO of Creative Learning Corp. in October 2015 and resigned from the board of directors in January 2016.
Creative Learning offers educational and enrichment programs for children through franchisees.
Pappas remains the largest shareholder, controlling 19.5 percent of the stock, and filed consent solicitations with the SEC asking shareholders to vote to remove the four current board members of Creative Learning and replace them with three nominees of his own.
The current board filed a response opposing Pappas’ efforts and said it has lawsuits pending against the former CEO.
Creative Learning’s revenue dropped 43 percent in the fiscal year ended Sept. 30 to $3.2 million, and it had a net loss of $1.8 million for the year.
The company’s annual report said the lower revenue was due mainly to lower initial franchise sales. The company suspended franchise sales from January to September after its fiscal 2015 audited financial statements were delayed.
Creative Learning said it sold 19 operating franchises in fiscal 2016, bringing its total to 710, but that was down from 135 franchise sales in fiscal 2015.
The company has nine full-time employees, according to the annual report.
Its stock trades on the OTC market under the ticker symbol “CLCN.”
Patriot changing fiscal year
FRP Holdings Inc. is another company with a fiscal year that ends on Sept. 30, a tradition dating back decades for the Jacksonville-based real estate developer and its predecessors.
However, the company said in an SEC filing it is changing its fiscal year to end with the calendar on Dec. 31. No reason was given for the change.
FRP was originally created as a transportation and real estate spinoff from construction materials company Florida Rock Industries Inc. in 1986.
FRP spun off the trucking business two years ago into a separate company called Patriot Transportation Holding Inc. Patriot maintains its Sept. 30 fiscal year but the two companies share several top executives, so that could change.
Florida Rock, which had a Sept. 30 fiscal year, was bought out by Vulcan Materials Co. in 2007.
PHH selling more operations
Struggling mortgage banker PHH Corp. continues to shrink.
The New Jersey-based company, which has a major operations center in Jacksonville, last week agreed to sell its remaining portfolio of mortgage servicing rights to New Residential Investment Corp. for $912 million.
The deal is big enough it will require approval from PHH shareholders. The company said it will use the proceeds to pay off debt.
PHH, which employs about 450 people in Jacksonville, has been going through a review of its business to evaluate strategic options.
CEO Glen Messina said in a news release announcing the servicing rights sale that the company is on track to complete the review by the end of January.
Deutsche Bank settlement eases concern
After several months of concern, Deutsche Bank announced just before Christmas it reached agreement with the U.S. Department of Justice to pay $7.2 billion in penalties to settle charges of wrongdoing in the issuance of mortgage-backed securities.
The settlement is about half of the $14 billion fine proposed by the Justice Department in September, an amount that raised concerns about the settlement depleting the Germany-based bank’s capital.
However, Deutsche Bank said in a news release the settlement is not expected “to have a material impact” on its 2016 financial results.
The settlement consists of a $3.1 billion penalty and $4.1 billion in consumer relief over five years, in the form of loan modifications and other assistance to U.S. homeowners and borrowers.
The penalties are related to mortgage-backed securities issued between 2005 and 2007.
Deutsche Bank employs about 1,800 people in Jacksonville and has said it could grow that office by another 1,000. However, the bank instituted a global hiring freeze in October as it wrestled with several financial issues, including the negotiations over the mortgage-backed securities settlement.