MAA and Colonial Properties Trusthave entered into a definitive agreement under which MAA and Colonial Properties Trust will merge, creating a publicly traded multifamily REIT with a pro forma equity market capitalization of approximately $5.1 billion and a total market capitalization of $8.6 billion.
Under the terms of the agreement, each Colonial Properties Trust common share will be converted into 0.36 newly issued MAA common shares, and the combined company will be an UPREIT. On a pro forma basis, following the merger, former MAA equity holders will hold approximately 56 percent of the combined company's equity, and former Colonial Properties Trust equity holders will hold approximately 44 percent. The all-stock merger is intended to be a tax-free transaction. The merger is subject to customary closing conditions, including receipt of the approval of a majority of both the MAA and Colonial Properties Trust shareholders. The parties currently expect the transaction to close during the third quarter of 2013.
The merger brings together two multifamily portfolios with a combined asset base consisting of approximately 85,000 multifamily units in 285 properties. The combined company will maintain strategic diversity across large and secondary markets within the high growth Sun Belt region of the U.S. The combined company's ten largest markets will be Dallas/Ft. Worth; Atlanta; Austin, Texas; Raleigh, N.C.; Charlotte; Nashville; Jacksonville, Tampa and Orlando, Fla.; and Houston.
"The scale of the combined company will support accelerated growth and deployment of capital across our high-growth Sun Belt markets driving superior value creation opportunity for our shareholders," MAA CEO H. Eric Bolton Jr. said in a statement. "In addition, through capitalizing on the strengths gained from the combination of the two platforms, we will enhance our ability to serve residents across the region, drive higher margins as a result of synergies and advantages generated by the merger, and enhance career opportunities for our associates."
"This is a combination that makes a lot of sense for the constituents of both Colonial Properties Trust and MAA," Colonial Properties Trust CEO Thomas H. Lowder said in a statement "Our two companies have a shared vision for success that will only be enhanced by coming together through this merger transaction. We are excited for the future of our combined company."
Both the board of directors of MAA and board of trustees of Colonial Properties Trust have unanimously approved the merger. The number of directors on MAA's Board of Directors will be increased to 12, of which 5 directors will be nominated by Colonial Properties Trust's board of trustees. Thomas H. Lowder will join the board of directors along with four others from Colonial Properties Trust. Alan B. Graf, Jr. and Ralph Horn, co-lead independent directors for MAA, will serve as co-lead independent directors for the combined company.
H. Eric Bolton, Jr., MAA's CEO and chairman, will serve as CEO and chairman of the combined company. Albert M. Campbell, III, MAA's CFO, will serve as CFO of the combined company, and Thomas L. Grimes, Jr., MAA's COO, will serve as the COO of the combined company.
Upon completion of the merger, the company will retain the MAA name and will trade under the ticker symbol MAA. Following the close of the transaction, the combined company's corporate headquarters will be located in Memphis, Tenn.
Annual gross G&A savings are estimated to be approximately $25 million. The combined company is expected to benefit from the elimination of duplicative costs associated with supporting a public company platform and the leveraging of state of the art technology and systems. These savings are expected to be realized upon full integration, which is expected to occur over the 18-month period following the closing.
On a consolidated basis the company will have a strong presence in both large and secondary markets. With a significant regional overlap, meaningful opportunity for synergy and margin improvement is expected. The combined company is committed to a strategy aimed at driving superior long-term shareholder performance with a full-cycle performance profile and objective.
The combined company is expected to have significant liquidity, a strong investment-grade balance sheet and a well-staggered debt maturity profile provided by long-standing lending partners.
J.P. Morgan is acting as financial advisor, and Goodwin Procter LLP and Baker, Donelson, Bearman, Caldwell & Berkowitz, PC acted as legal advisors to MAA. BofA Merrill Lynch is acting as financial advisor, and Hogan Lovells and Burr & Forman LLP acted as legal advisors to Colonial Properties Trust.