Office landlords Cousins Properties Inc. and TIER REIT Inc. agreed to merge in a 100% stock-for-stock deal to create a combined company with an equity market capitalization of approximately $5.9 billion and a total market capitalization of roughly $7.8 billion.
Under the definitive merger agreement, unanimously approved by the two companies' boards, Cousins will issue 2.98 shares of newly issued common stock in exchange for each share of TIER stock. The all-stock merger is intended to qualify as a tax-free "reorganization" for U.S. federal income tax purposes, according to a release.
Upon completion, Cousins and TIER stockholders will respectively own about 72% and 28% of the combined company, which will retain the Cousins name and trade on the New York Stock Exchange under the ticker symbol CUZ.
Based in Atlanta, the merged entity will be led by Cousins President and CEO Colin Connolly along with its existing senior management team. Larry Gellerstedt, the executive chairman of Cousins' board, will hold the same position at the combined company. Upon the merger's closing, Cousins will add two of TIER's board members to its board of directors, including TIER CEO Scott Fordham.
The merger is expected to establish a class A office real estate investment trust, with a combined portfolio of more than 21 million square feet across the Sun Belt region.
The companies expect to register approximately $18.5 million in annual net general and administrative savings upon closing, originating primarily through eliminating duplicative costs. Operational and leasing synergies are also expected through the increased market scale.
Subject to customary closing conditions, including receipt of approval from both Cousins and TIER stockholders, the merger is slated to wrap up during the third quarter of 2019.
As part of the conditions of the deal, TIER REIT entered into certain "no-shop" restrictions, including that it would not solicit proposals for alternative transactions. If TIER REIT does receive a superior proposal before shareholders approve the deal, the board may change its recommendation and TIER may terminate the deal with Cousins. Termination of the deal in the event a superior offer is accepted or under certain other circumstances, including willful breach of the "no-shop" restrictions, would require TIER REIT to pay a termination fee equal to the lesser of $45.5 million or the maximum amount TIER REIT could pay without causing it to fail to meet its REIT requirements that year to Cousins.
Morgan Stanley is acting as exclusive financial adviser, and Wachtell Lipton Rosen & Katz is acting as legal counsel to Cousins.
TIER engaged JP Morgan Securities LLC and Goodwin Procter LLP as exclusive financial adviser and legal counsel, respectively.