GO
Loading...

Enter multiple symbols separated by commas

UPDATE 1-Lehman to sell Archstone to Equity Residential, AvalonBay for $6.5 bln

* Equity Residential to buy 60 percent of Archstone's assets

* AvalonBay to buy 40 percent of Archstone's assets

* Deal for $6.5 bln in cash and stock for total of $16 bln

* Equity Residential, AvalonBay shares fall after market's close

(Adds background, details, stock price, byline)

By Ilaina Jonas

NEW YORK, Nov 26 (Reuters) - Lehman Brothers has agreed to sell the assets of apartment owner Archstone to rivals Equity Residential and AvalonBay Communities Inc for about $6.5 billion in cash and stock and the absorption of debt, bringing the total value of the deal to $16 billion, the companies said Monday.

The deal comes shortly after Archstone filed for a $3.5 billion initial public offering. It also follows an Equity Residential's unsuccessful bid earlier this year to buy the entire company, which includes apartment buildings and communities major U.S. cities.

Under the deal, which is expected to close in the first quarter, Equity Residential will own 60 percent of Archstone's assets and liabilities and AvalonBay will own 40 percent. The transaction does not require approval from Equity Residential or AvalonBay shareholders.

The combined purchase price includes $2.7 billion of cash and stock from Equity Residential and AvalonBay valued at $3.8 billion as well as the assumption of $9.5 billion in debt and $330 million of preferred equity.

In addition to the cash, Lehman and its affiliate, Lehman Commercial Paper Inc, will receive 34.5 million shares, or a 9.8 percent stake, in Equity Residential and 14.9 million shares, or a 13.2 percent stake, in AvalonBay.

In connection with the deal, AvalonBay said it would issue $14.5 million shares of stock to raise cash and repay a portion of the debt it will assume in connection with the Archstone purchase. If the deal doesn't go through, AvalonBay said it would use the proceeds for general corporate purposes.

Equity Residential, whose founder and chairman is real estate mogul Sam Zell, said it would issue 19 million shares to fund a portion of the deal. If the deal fails to occur it would use the net proceeds for working capital and general company purposes.

The deal was announced after the close of the market. Equity Residential shares were trading at $53.05, down from their close of $54.43 on the New York Stock Exchange. AvalonBay shares were at $127.00, down from their close of $128.95.

(Reporting by Ilaina Jonas; Editing by Gary Hill)

((ilaina.jonas@thomsonreuters.com)(1 646 223 6193)(Reuters Messaging: ilaina.jonas.thomsonreuters.com@reuters.net))

Keywords: LEHMAN ARCHSTONE/

Contact U.S. News

  • CNBC NEWSLETTERS

    Get the best of CNBC in your inbox

    Please choose a subscription

    Please enter a valid email address
    To learn more about how we use your information,
    please read our Privacy Policy.

Don't Miss

  • Why women cheat?

    Is cheating bad? Why do women cheat? The founder and CEO of affair website Ashley Madison tells all, including why he has his eye on China.

  • Judge's gavel

    The Financial Industry Regulatory Authority disciplined several financial services firms and individuals in May 2015.

  • Fine wines & finance

    Why you should try something a little different on date night. Bring the romance and champagne, and a calculator too. Every once in a while have a date to talk money and finance, and keep an important part of your relationship on track. Reporter Sharon Epperson talks to a couple who does just that.

U.S. Video

  • Cramer: Here's a sign the market could rally

    Wall Street's been soaking in red, but "Mad Money" host Jim Cramer has one signal to watch for that could point to another run.

  • Burger war maneuvers

    Cramer looks at the number of company's selling burgers and tries to determine the quality names, as well as those to avoid.

  • Cramer: What's driving defense?

    Cramer says that even though President Obama has made it clear the US can no longer be the world's policeman, the country can become the world's arms dealer. Profiting from defense spending.