Brookfield Asset Management Inc. (USA) (NYSE:BAM) is buying the Associated Estates Realty Corporation (NYSE:AEC) in a deal worth $1.7 billion. Associated Estates had been facing investor pressure to sell itself for some time now.
Brookfield will pay $28.75 a share for Associated Estates. This represents a premium of 17% over the current share price of Associated Estates and almost 50% premium from prices six months back. The deal is estimated to be worth about $2.5 billion inclusive of debt.
Brookfield is a global alternative asset management firm, the firm manages assets worth more than $200 billion. Brookfield’s CEO Jeffrey I. Friedman stated that the board of directors unanimously voted to buy Associated Estates. He further stated that the move was in the best interest of shareholders. Associated Estates owns apartments in ten states. The shares of Associated Estates rose by 16% to $28.51. The stock has increased by 68% in the past year.
Jonathan Litt’s Land & Building Investment Management had criticised Associated Estates’ performance and had urged it to sell itself to a buyer. He further stated that his firm was happy that the company was being acquired by Brookfield. He had earlier stated that Associated was not well suited for the public market and that it should sell itself to Litt’s or some other buyer. Land & Buildings owns a 2.23% stake in the trust.
Brookfield has been expanding its investing arm and is making forays into the rental market. It already owns a vast portfolio of real estate. It said that it was raising $1.1 billion by issuing shares to help fund deals.
Land & Buildings has estimated Associated Estates’ value at $31 per share. The firm is also indulged in a proxy engagement with casino operator MGM Resorts International and had been pushing for the sale of Associated Estates for some time now.
