Archstone-Smith Trust, a real estate investment trust, signed a definitive agreement to be acquired by real estate firm Tishman Speyer and Lehman Brothers in a deal worth about $22.2 billion including debt, Archstone said.
Under the terms of the agreement, the Tishman-Lehman partnership will acquire all outstanding common shares of Archstone for $60.75 a share in cash. That price marks a 22.7% premium over Archstone's share price last Thursday, just before the first published reports providing speculation about the deal.
The value of the transaction includes the assumption and refinancing of Archstone's outstanding debt and excludes transaction costs.
Archstone-Smith has a market capitalization of about $12.3 billion. Its stock trades at about 24 times Wall Street's earnings estimates for 2007, above the sector average of 18.4 times earnings.
"We have always been committed to maximizing value for our shareholders, and we believe this merger accomplishes that objective, offering a significant premium over the unaffected share price," said Archstone chief executive R. Scot Sellers in a prepared statement.
At the request of Tishman and Lehman, Sellers as agreed to terms of employment with the partnership "that will supersede his current employment arrangements with Archstone-Smith effective upon and subject to completion of the merger," Archstone said.
The acquisition becomes the latest in a wave of mergers in the real estate sector. Earlier this year, Blackstone Group acquired Equity Office Properties Trust for $23 billion.
Archstone owns apartments in lucrative markets such as Boston, New York, Southern California, San Francisco and Washington, D.C. As of March 31, Archstone owned or had an ownership stake in 344 communities with 86,014 apartments.
The transaction is being financed by equity from Tishman, with the balance of the debt and equity capital provided by Lehman and Bank of America .
Archstone retained Morgan Stanley as financial advisor on the deal, while Hogan & Hartson acted as legal advisor.
Completion of the transaction is expected to take place in the third quarter of this year, and is contingent on customary closing conditions and the approval of Archstone's shareholders.
Tishman Speyer owns properties including New York City's Chrysler Center and Rockefeller Center, London's CityPoint and Tower Place, Frankfurt's MesseTurm, Berlin's Sony Center and other prominent properties in Europe.