ATLANTA — Cousins Properties (NYSE: CUZ) and Parkway Properties (NYSE: PKY) have agreed to a $1.95 billion stock-for-stock merger. The deal will simultaneously spin off of both companies’ Houston-based assets, creating a new publicly traded REIT called HoustonCo.
The combined company will operate under the Cousins Properties name and continue to own Class A office towers in Sun Belt markets. The combined portfolio will include 41 properties totaling 15.8 million square feet of space in Atlanta; Austin, Texas; Charlotte, N.C.; Phoenix; and Orlando and Tampa, Fla.
Although Parkway currently owns properties in Jacksonville, Fla., a Cousins investor presentation about the merger implied those buildings will be sold.
Pre- and post-merger company assets. Click to view at a larger size. Source: Cousins Properties investor presentation.
Under the agreement, Parkway shareholders will receive 1.63 shares of Cousins stock for each share of Parkway stock they own. The combined company will create HoustonCo via a special dividend distributed to its shareholders once the merger is complete.
Jim Heistand, Parkway’s CEO, will head HoustonCo after the spin-off.
Cousins and Parkway shareholders will own about 52 percent and 48 percent, respectively, of both Cousins and HoustonCo. Both companies’ boards of directors approved the transactions unanimously. Affiliates of TPG, which own about 21 percent of Parkway’s outstanding common stock, have also agreed to vote in favor of the transactions. The deal is expected to close in the fourth quarter of this year.
“These creative transactions continue Cousins’ heritage as a proven ‘sharpshooter’ in the growing Sun Belt markets, deepening our presence in Atlanta, Austin and Charlotte and establishing a strong presence in Phoenix, Orlando and Tampa,” says Larry Gellerstedt, president and CEO of Cousins.
“We firmly believe our shareholders will benefit by having an expanded portfolio of office towers in key urban submarkets, greater tenant and geographic diversity and enhanced access to the capital markets,” continues Gellerstedt. “At the same time, we believe that unlocking the value in our Houston portfolio allows us to capitalize on that market’s eventual resurgence through the creation of HoustonCo.”
Company executives say HoustonCo will have a conservative balance sheet with $150 million of cash surplus on hand, plus an additional $50 million undrawn credit facility to pursue new investments. Bank of America, Wells Fargo and JP Morgan have all provided new credit facility commitments for the future company.
Goldman, Sachs & Co. and J.P. Morgan Securities LLC served as financial advisors to Cousins Properties on the transaction, while Wachtell Lipton Rosen & Katz acted as legal counsel. The Eastdil Secured group of Wells Fargo Securities LLC and BofA Merrill Lynch served as financial advisors to Parkway, while Hogan Lovells US LLP acted as legal counsel.
Cousins’ stock price closed at $10.35 per share on Friday, April 29, up from $9.95 per share one year ago. Parkway’s stock price closed at $16.45 per share on Friday, April 29, down from $16.60 per share one year ago.
— Nellie Day