Will Ramco-Gershenson (RPT) Be Taken Out?

Ramco-Gershenson (NYSE: RPT) is climbing today 12% on above average volume after it announced yesterday it is reviewing financial alternatives and it received a potential buyout offer from Equity One.

Ramco-Gershenson did note that it received a letter of interest from a third party, Equity One. Ramco's Board has decided to take no action at this time in regards to the requests made in Equity One's letter regarding board representation, access to confidential information, and the waiver of the ownership limitation prescribed in Ramco-Gershenson's Declaration of Trust.

Equity One currently owns 1.79 million shares or 9.63% of Ramco-Gershenson's outstanding shares.

Below is excerpts from Equity One's letter to Ramco-Gershenson's Chairman and CEO, Dennis Gershenson.

"Thank you for meeting with us on Wednesday, March 18, 2009. As you know, Equity One, Inc. recently made a significant investment in the common shares of beneficial interest of Ramco-Gershenson Properties Trust. As owners and operators of neighborhood and community shopping centers, Equity One and RPT have common interests and would benefit from developing a closer business relationship.

We note that RPT has a current equity market capitalization of less than $100 million and a debt-to-total market capitalization of approximately 83.3% (as of 12/31/08). Moreover, RPT’s total shareholder return has underperformed the SNL US REIT Retail Shopping Center index... In addition, RPT has little remaining availability under its $150 million credit facility and has material future funding needs due to short-term debt maturities and development projects currently underway.

We believe it would be in the best interests of all RPT shareholders for RPT to promptly undertake an exploration of strategic alternatives to its current business plan, including a possible business combination with a strategic partner. We believe that such a transaction would deliver an immediate benefit to all RPT shareholders and, in the case of a stock transaction with the right partner, would allow RPT shareholders to participate in the upside of a larger combined business with greater efficiencies and maximize returns in any market environment.

In this regard, we note that Equity One may be the optimal partner for a business combination with RPT. Equity One and RPT have overlapping footprints in many of our markets and, by achieving operational synergies across a combined portfolio, Equity One and RPT would benefit from a more efficient leasing and property management platform in these markets.

Furthermore, Equity One has one of the strongest balance sheets in the shopping center sector, with a current equity market capitalization of approximately $1 billion and a debt-to-total capitalization ratio of approximately 43.9% (as of 12/31/08). Equity One also carries investment grade debt ratings from S&P and Moody’s."

You can see the entire letter from Equity One's CEO, Jeffrey Olson, to Ramco's President here.

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