ATLANTA AND DALLAS — Cousins Properties Inc. (NYSE: CUZ) and Dallas-based TIER REIT Inc. (NYSE: TIER), two of the larger office development and investment firms in the country, have entered into an all-stock merger agreement. The combined company, which will retain the Cousins name, will have an equity market capitalization of $5.9 billion and a total market cap of $7.8 billion.
Following the merger, the company will continue to function as a Class A office REIT with a combined portfolio of approximately 21 million square feet spread across various markets in the Southeast and Southwest. Both firms are active in leading office markets like Atlanta, where Cousins is based, as well as Charlotte, Dallas and Austin.
Cousins owns several trophy assets in Atlanta’s Buckhead area, including 3348 and 3350 Peachtree, which have about 670,000 square feet combined, as well as 816 Congress and 303 Colorado in downtown Austin. TIER REIT owns 3354 Peachtree, a 560,000-square-foot building in Atlanta, as well as the 40-story Burnett Plaza in Fort Worth and the 1.5 million-square-foot Domain office building in Austin.
Under terms of the agreement, Cousins will issue 2.98 shares of common stock in exchange for each share of TIER stock. That rate of exchange translates to $29.44 per share for the new company, based on Cousins’ closing stock price of $9.88 per share on Friday, March 22.
The deal is expected to close in the third quarter. Once the transaction is complete, Cousins’ shareholders will own 72 percent of the new company and TIER’s shareholders will own 28 percent. According to Market Watch, the deal will generate approximately $18.5 million in annualized savings on general and administrative expenses.
“The combination of these two highly complementary companies creates the pre-eminent Sun Belt office REIT with a best-in-class balance sheet,” said Colin Connolly, president and CEO of Cousins. “The company will own an unmatched portfolio of trophy office properties in the premier submarkets of Atlanta, Austin, Charlotte, Dallas, Phoenix and Tampa.”
“In addition, the company will be uniquely positioned to drive superior value for shareholders through its highly preleased existing development pipeline and well-located strategic land holdings for future development,” added Connolly.
Scott Fordham, CEO of TIER REIT, noted that his firm’s development pipeline exceeding 5 million square feet in key markets was an equally important factor in driving the deal between two similar companies.
“The alignment of high-quality properties and common geographic footprint in our portfolios will offer shareholders opportunities to benefit from a truly differentiated Sun Belt-focused office platform,” says Fordham.
Morgan Stanley is acting as exclusive financial advisor and Wachtell, Lipton, Rosen & Katz is acting as legal counsel to Cousins. J.P. Morgan Securities LLC is acting as exclusive financial advisor and Goodwin Procter LLP is acting as legal counsel to TIER REIT.
The stock price of Cousins Properties opened at $10.01 per share on Monday, March 25, up from $8.53 per share a year ago. Shares of TIER REIT opened at $25.84 per share this morning, up from $18.28 per share at this time last year.
—Taylor Williams