CB Richard Ellis Group Inc. (NYSE: CBG) a commercial real estate broker, has agreed to buy Trammell Crow Co. for $1.8 billion in cash. The purchase will more than double CBRE's property management business in the process.
CB Richard Ellis will pay $49.51 per Trammell Crow share, Los Angeles-based CB Richard Ellis said today in a statement. Including debt, the transaction will have a total value of about $2.2 billion.
The company plans to issue $2.2 billion of term loans to finance the transaction, and will also amend or refinance its existing $600 million revolving credit facility. In addition, the company plans to sell Trammell Crow Co.'s approximately 20 percent ownership interest in Savills, Plc, a real estate services provider in the United Kingdom.
"This is a very logical fit because CB Richard Ellis is very strong in transactions and Trammell Crow has little presence outside the U.S.," said Aubrey Adams, chief executive officer of Savills Plc.
Buying Dallas-based Trammell Crow will allow CB Richard Ellis to provide building management services to more than 85 percent of Fortune 100 companies. It will give CB Richard Ellis total sales of about $4.4 billion and enhance earnings per share by between 10 percent and 15 percent, the company said.
"The acquisition of Trammell Crow Co. creates the best-in-class corporate outsourcing and institutional property management business, and further augments our transaction business," said Brett White, CB Richard Ellis chief executive officer in a statement.
"Our strategic objective has long been to create the market-leading commercial real estate services firm delivering comprehensive solutions to our clients. Well targeted acquisitions have played a pivotal role in our strategy," White said. "With the acquisition of Insignia in 2003, we achieved preeminence in our transaction business. Now the acquisition of Trammell Crow Co. creates the best-in-class corporate outsourcing and institutional property management business, and further augments our transaction business.
Lazard Freres & Co. LLC advised Trammell Crow on the sale.
CB Richard Ellis said the acquisition will strengthen its ability to provide integrated account management and outsourcing services globally. Trammell oversees nearly 550 million square feet of warehouse, service center and retail space in the United States and Canada, with services including property investment advice, tenant relations and planning.
With nearly 50 offices in the United States, Trammell Crow employs about 6,200 workers and posted 2005 earnings of $59.4 million on $896 million in sales.
The purchase price of $49.51 per share in cash represents a 27 percent premium to Trammell's closing price Monday of $39.10 on the New York Stock Exchange.
The companies said assumed debt, transaction and integration costs would add another $400 million to the cost of the deal.
The companies expect to complete the deal in late 2006 or early 2007, subject to approval by Trammell Crow shareholders, federal regulatory agencies and other customary conditions. Trammell Crow's board has unanimously approved the merger agreement and recommended the deal to stockholders.
As a result of the acquisition, CB Richard Ellis said its contractual revenue related to outsourcing activities will more than double to 18 percent of total revenue, from 8 percent previously.
CB Richard Ellis shares closed Monday at $28.22, where they have ranged between $15.65 and $29.83 over the past year. The company recently acquired fellow real estate behemoth Insignia Financial to make the entity the world's top commercial property manager, overseeing more than 522 million square feet. Chairman Richard Blum owns 14 percent of the firm through his arm, Blum Capital Partners.
CB Richard Ellis employs about 14,500 workers and posted 2005 net income of $217.3 million on sales of $2.91 billion.
Robert Sulentic, Trammell Crow chairman and chief executive officer, stated, "We are committed to providing outstanding value for our shareholders, and this combination accomplishes that objective. Our shareholders will receive value through the purchase of their shares at a very attractive price. We also believe our clients will benefit from the capabilities and resources of this expanded global platform."
Founded in 1948, Trammell Crow Co. is one of the largest diversified commercial real estate services companies in the world. The company provides brokerage, project management, building management, and development and investment services to both investors in and users of commercial real estate. In addition to its full service offices located throughout the United States, the company has offices in Canada, Europe, Asia and Latin/South America.