Big stockholders' objections hinder Prime Retail sale

July 17, 2003|by PEPPER BALLARD

Prime Retail Inc., the company that owns Prime Outlets at Hagerstown, said Wednesday the proposed sale of the company might be in danger.

Last week, Prime Retail announced the proposed sale of the company to The Lightstone Group, a privately held real estate company based in Lakewood, N.J.

The holders of at least 66 2/3 percent of Prime Retail's stock, holders in Series A preferred stock, holders of Series B preferred stock and holders of a majority of the common stock, must approve the sale and merger agreement.


In a statement released Wednesday, Prime Retail officials said that two shareholders that own about 32 percent of Series A Preferred Stock have indicated that the proposed sale is inadequate.

In separate communications, Merrill Lynch & Co. Inc. which owns 511,572 shares, or about 22 percent of the outstanding Series A Preferred Stock, and Fortress Investment Trust II, which owns 230,000 shares, or about 10 percent, of such stock, have indicated that the proposed allocation of $16.25 per share of Series A Preferred Stock is inadequate.

Under the merger agreement with Lightstone, Prime Retail shareholders and unit holders would get a total of $115 million, according to a statement released last week.

Owners of Prime Retail's Series A preferred stock would get $16.25 per share while holders of Series B preferred stock would get $8.66 per share. Holders of common stock would get 18 cents per share, the release says.

Prime Retail officials, along with its financial and legal advisors, expect to talk soon with objecting stockholders about the proposed allocation.

The sale is based on certain conditions being met.

Steven Sless, corporate spokesman for Prime Retail, was not available for comment Wednesday.

Baltimore-based Prime Retail has faced financial difficulties in recent years.

In December, Prime Retail officials said the company had paid off a $90 million mezzanine loan early. The company had taken that three-year loan from Fortress Investment Fund in December 2000 to help stave off bankruptcy.

Prime Retail has not issued dividends since the fourth quarter of 1999.

Prime Outlets at Hagerstown opened in August 1998.

In January 2002, Prime Retail sold 70 percent of the local outlet center to a partnership of Prime Retail and Estein & Associates USA Ltd.

The sale of Prime Retail to Prime Outlets Acquisition Company, an affiliate of The Lightstone Group, has a total value of approximately $638 million, according to a corporate news release from Prime Retail. That includes $523 million of debt the buyer is expected to assume, the statement says.

Staff Writer Julie Greene contributed to this story.

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