Brookfield Property Partners announced Sept. 30 that it is offering to fully acquire Brookfield Office Properties (NYSE/TSX: BPO) in a transaction valued at $5 billion.
Brookfield Property currently owns 51 percent Brookfield Office. Under the terms of its proposal for the remaining 49 percent of Brookfield Office’s equity interest, Brookfield Property is offering $19.34 or one limited partnership unit in exchange for each common share of Brookfield Office stock. In total, Brookfield Property is offering a maximum of 174 million partnership units and $1.7 billion in cash.
Brookfield Property’s offer represents a 15 percent premium on the Sept. 27 closing price of shares of Brookfield Office common stock on both the NYSE and Toronto Stock Exchange.
In a statement regarding the proposal, Ric Clark, CEO of Brookfield Property Group and chairman of the Brookfield Office board of directors, said the goal of the transaction would be to diversify his company’s holdings, boost efficiency and increase its scale.
“The combination of these leading commercial real estate platforms will create a diversified portfolio of best-in-class real estate for investors seeking attractive risk-adjusted returns, through income and capital appreciation,” Clark said. “In addition, we believe this transaction will consolidate our global office properties under one platform and substantially increase Brookfield Property Partners' public float which should help accelerate our growth strategy.”
For Brookfield Property, “the deal simplifies its structure, creates more liquidity for its shares and allows it to accelerate its growth strategy,” said Vin Chao, analyst with Deutsche Bank, in a note on the announcement. “Furthermore, management expects the deal to be immediately accretive to both NAV and FFO.”
Brookfield Property noted that a full acquisition of Brookfield Office would give Brookfield Property $45 billion in commercial real estate assets around the world.
Brookfield Office said its board of directors has established a special committee to evaluate Brookfield Property’s offer.
Brookfield Office’s stock price closed trading on Sept. 30 at $19.07 per share. It marked a 6.8 percent increase on its previous close.