Essex Property Trust is to combine with BRE Properties to create the only publicly traded West Coast pure play multifamily REIT.
The combined company is expected to have a pro forma equity market capitalisation of approximately USD10.4bn and a total market capitalisation of approximately USD15.4bn.
Under the terms of the agreement, each BRE common share will be converted into 0.2971 newly issued shares of Essex common stock plus USD12.33 in cash. Based on the closing stock price for Essex on 18 December, this transaction is valued at USD56.21 per BRE share.
Essex has obtained committed financing of USD1.0bn which is available if needed to fund the cash portion of the purchase price. The company is exploring several alternatives to fund the cash needs of the transaction including asset sales, joint ventures or new financing. The merger is subject to customary closing conditions, including receipt of approval of Essex and BRE shareholders. The parties currently expect the transaction to close during the first quarter of 2014.
"The combination of Essex and BRE creates a stronger platform for sustainable growth and value creation going forward. The combined company will be the largest and only publicly traded pure play apartment REIT on the West Coast which we believe will provide a greater competitive advantage in our markets," says Michael Schall, Essex's president and CEO. "In addition, by combining the strengths of the two platforms, which have a significant geographic overlap, we expect to realise operating efficiencies and further enhance our growth profile."
"For over a year, BRE's board and management team have been evaluating alternatives to maximise shareholder value. We are pleased to have reached this agreement with Essex, which we believe will deliver significant value to all of our stakeholders," says Constance B Moore, chief executive officer of BRE. "This transaction will create a must-own sharpshooter REIT focused on West Coast apartments, and we believe this is a great outcome for our company."