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Cousins Properties (CUZ) Announces Merger With TIER REIT

Cousins Properties Incorporated CUZ and TIER REIT, Inc. TIER have announced plans to merge in a 100% stock-for-stock deal that will create a Sun Belt-focused Class A office REIT with total market capitalization of nearly $7.8 billion.

The transaction is anticipated to close in third-quarter 2019.

Merger Considerations

Accordingly, Cousins Properties will issue 2.98 shares of its common stock for every share of Dallas-based TIER. The combined company will have an equity market capitalization of around $5.9 billion. Upon merger completion, pro-forma equity ownership for Cousins and TIER stockholders will be nearly 72% and 28% of the combined stock.    

Though the deal has been unanimously approved by the board of directors of both companies, it is subject to customary closing conditions. Also, the approval of both Cousins and TIER stockholders is pending.

After the merger, Cousins Properties will retain its name and ticker and will remain headquartered in Atlanta, GA.

Merger Rationale

The deal is expected to create synergies by reducing duplicative costs in markets where both companies have an overlapping presence. Specifically, annual net G&A savings of nearly $18.5 million are expected to be immediately realized on merger closing.

The transaction is expected to modestly dilute Cousins Properties 2019 funds from operations (FFO) per share on account of one-time gains from its Norfolk Southern transaction. (Read more: Cousins Properties Raises '19 View on Strategic Transactions)

Nonetheless, over the long term, it expects that increased market scale and concentration will enable the company to realize operational and leasing synergies. In fact, it will create a larger company with a combined portfolio of more than 21 million square feet spanning across the Sun Belt region, better positioning it to absorb market cycles.  

Further, the merger will deepen Cousins Properties’ portfolio of trophy office assets in Atlanta, Austin, Charlotte, Dallas, Phoenix and Tampa, making it a leading owner in the fast-growing Sun Belt region.

Along with a complementary geographic footprint, the combined company will have a strong balance sheet, a highly pre-leased development pipeline and significant land holdings in strategic locations that provide opportunities for future development. 

Over the past three months, shares of this Zacks Rank #2 (Buy) company have rallied 18.5% compared with the industry’s growth of 15.5%.

Other Stocks to Consider

Investors can also consider some other top-ranked stocks from the same space like Terreno Realty Corp. TRNO and Boston Properties, Inc. BXP, carrying a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Terreno Realty’s FFO per share estimates for first-quarter 2019 remained unchanged at $1.32 over the past month. Further, it has a long-term growth rate of 8.40%.

Boston Properties’ FFO per share estimates for the ongoing year have been revised marginally north to $6.92 in 30 days’ time. Additionally, it has a long-term growth rate of 6.20%.

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