Verde Realty and a fund sponsored by Brookfield Asset Management’s Brookfield Property Group are to merge in a transaction that will provide Verde shareholders with a price of USD12.85 per share and a total equity transaction value of up to USD366m.

In conjunction with the signing of the merger agreement, the fund and certain shareholders of Verde, comprising approximately 19 per cent of the outstanding shares, have entered into definitive voting agreements whereby such shareholders have agreed to vote in favour of the merger and against any alternative transactions.

At closing, a subsidiary of the fund will merge into Verde Realty, with Verde as the surviving entity. Hillwood will be an investor in Verde.

All existing shareholders will be entitled to receive cash in the merger. Shareholders who are accredited investors will also have a right to elect to receive common shares of the surviving company in lieu of cash, provided that they also sign a shareholders' agreement (such rollover right to be reduced pro-rata to meet a requirement that the fund will acquire at least 55 per cent of Verde on a fully diluted basis).

Concurrently with, and subject to the closing of the merger, Verde will also offer to purchase any and all outstanding common partnership units and convertible preferred units for USD12.85 per unit and to purchase convertible debentures of Verde's operating partnership for a common unit equivalent value (i.e. USD12.85/unit).

The transaction is subject to shareholder approval and other customary closing conditions and is expected to be completed in the fourth quarter of 2012. Wells Fargo Securities has rendered a fairness opinion to Verde with respect to the price per share.

"This merger transaction with Brookfield ensures that Verde is well-positioned to benefit from renewed demand for industrial space which will increase as the economy continues to show signs of improvement," says Ronald Blankenship, chairman and chief executive officer of Verde.

As investment opportunities arise, the fund has agreed to negotiate in good faith to provide additional capital to Verde in the form of a backstop for rights offerings of up to USD200m.

"We are excited for the opportunity to work with the experienced Verde team and expanding the breadth of our real estate operations, establishing a cornerstone investment in an industrial platform of high-quality industrial properties," says David Arthur, managing partner at Brookfield Asset Management.