Mid-America Apartment Communities Inc. (NYSE:MAA), the Memphis-based real estate investment trust, announced today to buy its peer Colonial Properties Trust Inc. (NYSE:CLP) for $2.2 billion in an all-stock deal. Mid-America Apartment Communities Inc. (NYSE:MAA) plans to expand in the South and Southwest regions as demand for U.S. apartment rentals increases.
Colonial Properties Trust Inc. (NYSE:CLP) shareholders will receive 0.36 shares of Mid-America Apartment Communities Inc. (NYSE:MAA) for each Colonial share they own. The offer values Colonial Properties at $24.47, an 11 percent premium to its closing price on Friday, report Neil Callanan & Kara Wetzel of Bloomberg. Mid-America shareholders will own 56 percent stake in the combined entity, while Colonial Properties shareholders will get the remaining 44 percent. The deal is expected to be completed by the end of the third quarter.
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The newly formed company will keep the Mid-America Apartment Communities Inc. (NYSE:MAA) name, and the headquarters will remain in Memphis, Tennessee. Mid-America will increase the number of its board members from 7 to 12. The five new directors will be from Colonial, including the Birmingham, Alabama-based company’s CEO Thomas Lowder. The companies said in a statement that the combined company will trader under the “MAA” ticker symbol.
The deal will form an REIT that will have about 85,000 rental units. The demand for rental apartments is increasing in the United States from people who don’t qualify for a mortgage and who don’t want to own a house after the worst housing crash in decades. Apartment vacancy rate in the country declined to 4.3 percent in the first quarter.
Mid-America To Generate $25 Million In Additional Savings
Mid-America Apartment Communities Inc. (NYSE:MAA) CEO H. Eric Bolton Jr. said that the merger will increase margins for the new company as a result of synergies and strategic advantages. The merged company will have 285 properties with a strong presence in Dallas, Fort Worth, Austin, Raleigh, Atlanta and Jacksonville.
Mid-America Apartment Communities will generate $25 million in additional savings per year once the merger is completed. Both the boards unanimously approved the deal, but it is yet to be approved by shareholders of both companies.
Mid-America Apartment Communities Inc. (NYSE:MAA) shares fell 2.50 percent to $66.27, while Colonial Properties Trust Inc. (NYSE:CLP) rose 6.65 percent to $23.58 at 9:54 AM EDT.