Investor Raises Bid for Burnham Pacific

From Bloomberg News

Retailer and property investor Jay Schottenstein on Tuesday raised his unsolicited all-cash bid for Burnham Pacific Properties Inc. to $13.50 a share from $13, valuing the shopping center real estate investment trust at about $1.2 billion.

In a letter sent to San Diego-based Burnham, Schottenstein complained that despite repeated requests, the company and its advisors have refused to meet with him about the bid. Schottenstein, the chairman and majority owner of Value City Department Stores Inc., also said he believes Burnham's management may be preparing its own bid for the company.

By purchasing Burnham, Schottenstein could expand his Value City chain, which is concentrated largely in the Midwest and East, as well as another retail chain he controls, American Eagle Outfitters Inc., to the West.

The higher bid increases the likelihood that Burnham's management will either sell to another company or find an investor to help finance its own bid, analysts said.

"This puts a lot more pressure on Burnham's board to do something," said Craig Silvers, an analyst at Sutro & Co.

One possible partner for Burnham, Silvers said, is the California Public Employees' Retirement System, which recently teamed up with Burnham to buy 28 shopping centers for about $665 million.

Burnham Executive Vice President Daniel Platt declined to comment, saying the company will issue a response to the new offer, possibly today. CalPERS officials weren't immediately available to comment.

So far, Burnham has said only that it's reviewing Schottenstein's offer. It also hired Goldman, Sachs & Co. as an advisor and put in place a "poison pill" anti-takeover plan, which is designed to make hostile takeovers more expensive.

Burnham Pacific received the initial bid from Schottenstein on June 7, when the stock was at $11.13. On Tuesday, the shares rose 13 cents to close at $12.50 on the New York Stock Exchange. Schottenstein has accumulated a 9.4% stake in Burnham.

Silvers estimated that Burnham's properties could be worth as much as $17 a share because of improving cash flow. Burnham owns 71 strip shopping centers, mainly in California, with 8.6 million square feet of space.

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