ARLINGTON, VA. AND CHICAGO — Multifamily owners and operators AvalonBay Communities (NYSE: AVB) and Equity Residential (NYSE: EQR) have announced a definitive, all-stock merger agreement. The new combined company will have a total enterprise value of $69 billion, with a market capitalization of $52 billion.
Following the merger, the combined company’s portfolio will comprise more than 180,000 apartments. Together, AvalonBay and Equity Residential currently have 10,800 apartments under construction, totaling $4.4 billion in estimated value. Annual cash flow for the new company is estimated at $2 billion.
The merger has been unanimously approved by the AvalonBay board of directors and Equity Residential board of trustees. Under the agreement, AvalonBay shareholders will receive roughly 2.8 shares of Equity Residential common stock for each owned share of AvalonBay common stock.
Equity Residential shares closed at $66.28 on May 20, up from $65.97 a year prior. AvalonBay shares closed at $186.69 on May 20, down from $194.17 a year prior.
According to the companies, the merger will enhance resident experience and expand margins across the multifamily portfolio by scaling operations.
“This combination creates a new and fundamentally stronger company with differentiated capabilities that will drive structurally superior cash flow generation, earnings and dividend growth, and value for shareholders,” says Benjamin Schall, CEO and president of AvalonBay. “As one of the country’s leading developers of new apartments across our regions, we will directly increase the supply of both market-rate and affordable housing.”
Schall will serve as president, CEO and trustee of the combined company, which will maintain dual headquarters in Arlington and Chicago. Mark Parrell, CEO of Equity Residential, will retire upon the closing of the transaction.
— Hayden Spiess