Long after Monday’s closing bell — just after 8 p.m. EST — Chicago-based Jones Lang LaSalle (JLL) and Dallas-based The Staubach Co. formally announced their long-anticipated merger.
The $613 million caps weeks of intense speculation and makes the combination the second-largest brokerage firm globally, with a combined $184.7 billion in investment sales and leasing transactions in 2007, according to National Real Estate Investor’s top annual brokerage survey. Los Angeles-based CB Richard Ellis remains the No. 1 brokerage with $264.2 billion in sales and leasing volume in 2007.
With the Staubach purchase, Jones Lang LaSalle substantially beefs up its tenant representation business overnight. The combined firm will operate under the Jones Lang LaSalle brand, which means the end of The Staubach Co. name, founded by chairman Roger Staubach 31 years ago.
“The proposed deal sounds pretty good for Jones Lang LaSalle,” says Brandon Dobell, an analyst with William Blair & Co. “Staubach's tenant rep business aligns well with JLL’s strengths and brings a solid brand into JLL's company.”
The merger is expected to close in the third quarter, but does not include Staubach Retail Services or Cypress, Staubach’s investment development business, both of which will continue to operate under license agreements.
Under terms of the deal, Jones Lang LaSalle is paying $123 million in cash, $100 million in stock at the transaction close and the balance in cash over five years, for all of the outstanding capital stock of Staubach Holdings Inc.
The agreement also calls for potential earn-out payments of up to $114 million that are subject to the achievement of certain performance metrics measured over a period of up to approximately four and a half years after the closing.
The transaction is expected to be accretive to earnings per share in 2009 and beyond, on the basis of generally accepted accounting principles (GAAP) as integration costs are fully expensed and debt and associated financing costs are reduced.
“The Staubach Company is recognized for exceptional tenant representation expertise and is a leading presence in markets throughout the United States. We are delighted that they have decided to join our company,” says Colin Dyer, Jones Lang LaSalle’s CEO. “Merging our businesses reinforces two of our global growth priorities, building our position in key U.S. local markets and strengthening our corporate services business by introducing Staubach clients to our global corporate solutions capabilities.”
According to the announcement, Staubach leadership will hold key positions within the combined organization. Roger Staubach will join Jones Lang LaSalle’s board of directors and will serve in the new role of executive chairman of the Americas. He will be actively involved in the firm, focusing on client relationships, new business development and strategy.
Greg O’Brien, currently Staubach’s CEO, will be the CEO of brokerage in the Americas, leading the newly created business that will set strategic direction in tenant rep and agency leasing. John Gates, Staubach’s president and COO, will serve as president of brokerage for the Americas. Both O’Brien and Gates will join the firm’s Americas executive committee, which is headed by Peter Roberts, Jones Lang LaSalle’s CEO of the Americas.
“This merger is all about working to be the best. We want to bring the value of what we’ve built at The Staubach Company to the next level and have chosen to do this with Jones Lang LaSalle because of its global platform, commitment to service and exceptional reputation,” said Staubach. “In today’s global economy when so many of our clients want an international platform, this merger gives us the opportunity to provide those services seamlessly as one team working together.”
With the addition of more than 1,000 Staubach employees, the combined firm will include 33,700 employees around the world and 11,500 in the Americas. The transaction also will add 14 new corporate offices to Jones Lang LaSalle’s 54 in the Americas, bringing the total corporate offices in the Americas to 68 and 184 globally.
“It’s not about being bigger, it’s about being the best for our clients and our people,” said O’Brien. “By joining forces, we will gain increased scale in strategic areas such as industrial brokerage, facilities management and capital markets. We will be a dominant player in both tenant representation and agency leasing services across the Americas. Our team will have the resources to provide a higher level of service to our clients through in-depth delivery systems and service offerings.”
Morgan Stanley & Co. Inc., Skadden, Arps, Slate, Meagher & Flom LLP and DLA Piper advised Jones Lang LaSalle. JP Morgan and Gardere Wynne Sewell LLP advised The Staubach Co.