Blackstone to acquire Equity Office for $19 bn
Private equity buyout firm Blackstone Group agreed on Monday to buy US office building owner Equity Office Properties Trust in a deal valued at nearly $19 billion excluding debt.
Equity Office, founded by real estate mogul Sam Zell in 1976, has been the subject of buyout rumors for about six months, as private funds, including Blackstone have been snapping up publicly traded real estate investment trusts at a quickening clip.
The offer by Blackstone affiliate Blackstone Real Estate Partners of $48.50 per share in cash — an 8.5% premium to the stock’s last closing price — values the equity of the company at nearly $19 billion, based on share data from the company’s latest regulatory filing.
When including debt, the deal is valued at $36 billion, which tops the previous biggest leveraged buyout under this measure — the $33 billion buyout of hospital operator HCA earlier this year. Excluding debt, the HCA deal was worth $21 billion.
Shares of Equity Office closed on Friday at $44.72 on the New York Stock Exchange. In June ’05, Zell told reporters that Equity Office shares were undervalued, and the company was trading at only 80% of its net asset value — a measure of the property firm’s portfolio value.
Equity Office said its board of trustees had approved the deal, which is expected to be completed in the first quarter of ’07. It said neither its management nor its trustees were part of the buying group.
“We believe that the skills and strengths of Equity Office will greatly enhance our existing office platform, which has been expanded through our recent acquisitions of CarrAmerica and Trizec,” Jonathan Gray, senior managing director of The Blackstone Group, said in a news release.
Equity Office and Blackstone were not immediately available for comment. Multi-billion dollar leveraged buyouts have become the norm recently as high liquidity in the global financial system has sent cash rushing into the private equity sector.
Private equity firms typically buy companies with a small portion of their own cash and borrow the rest. They tend to hold a business for three to five years, restructure it, and then sell it, either to a buyer or on the open market in an initial public offering.
Blackstone has raised a total of more than $67bn for alternative asset investing of which almost $13 billion has been for real estate investing. The firm has a long track record of investing in office buildings, hotels and other commercial properties.
It recently acquiring office real estate investment trust (REIT) Trizec Properties for $4.8 billion, plus the assumption of $4.1 billion of Trizec’s debt. In July, Blackstone bought office property owner CarrAmerica Realty for a total of $5.6 billion
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