Brookfield Agrees to Buy
Trizec in $8.9 Billion Deal
Trizec Properties Inc. and Trizec Canada Inc. announced Monday that they have agreed to be acquired by Brookfield Properties Corp. and private-equity firm Blackstone Group in an $8.9 billion deal, including $4.1 billion in debt.
Trizec, which was built up by Canadian real-estate tycoon Peter Munk, is one of the largest owners of commercial property in North America. The Chicago-based company owns interests in 61 office properties comprising about 40 million square feet in seven major U.S. metropolitan areas.
Toronto-based Brookfield has a portfolio of 67 commercial properties totaling 48 million square feet. It owns the World Financial Center, near Ground Zero in Lower Manhattan.
Under the agreement, a joint venture of Brookfield and Blackstone will acquire all outstanding common shares of Trizec Properties that are not owned by Trizec Canada for $29.01 a share in cash. In addition, Brookfield will acquire the outstanding shares of Trizec Canada for $30.97 a share. The additional $1.96 cash consideration per Trizec Canada share reflects the value of Trizec Canada's net assets other than its approximate 38% interest in Trizec Properties.
The payment for the Trizec Properties common stock represents an 18% premium over Friday's price of $24.60 in 4 p.m. composite trading on the New York Stock Exchange. In afternoon trading Monday, the stock was trading up $4.13, or nearly 17%, at $28.73.
The boards of both Trizec Properties and Trizec Canada have approved the deal, which is expected to close by the end of the year.
"Even though Trizec has made great strides and has delivered one of the best total returns to stockholders for office REITs during the past three years, the company continues to be undervalued in the public markets," Trizec President and Chief Executive Tim Callahan said in a prepared statement.
"In recognizing the underlying value of the company's office portfolio, and especially, its operating platform, the transaction announced today accomplishes Trizec's ultimate objective as a public company, which is to maximize stockholder value," he said.
Brookfield said the joint venture will be financed with property and corporate debt, equity contributions of $1.3 billion by Brookfield and institutional partners and the balance of the equity by Blackstone. Brookfield said its equity commitment, after syndication to institutional partners, is expected to be approximately $450 million. It put the combined equity value of Trizec at $4.8 billion.
Trizec Properties was launched as a publicly traded U.S. office real-estate investment trust in May 2002, as part of the reorganization of Canadian-based TrizecHahn Corp. Its holdings include Renaissance Tower in Dallas, Bank of America Plaza in Los Angeles and One New York Plaza in Manhatan.
"Trizec represents a tremendous opportunity to further our investment in the U.S. office market recovery," Jonathan D. Gray, a senior managing director at Blackstone, said in a prepared statement.
Mr. Munk created Trizec predecessor Horsham Corp. In 1983, the Hungarian-born businessman also founded Barrick Gold Corp., one of the world's biggest gold producer. Mr. Munk is currently chairman of Trizec's board, which includes former Canadian Prime Minister Brian Mulroney.
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