AvalonBay Communities Inc. (NYSE: AVB) and Equity Residential (NYSE: EQR) announced they are merging in an all-stock transaction.
According to the companies, the new merged entity will encompass more than 180,000 rental apartments and boast a pro forma equity market capitalization of approximately $52 billion, with a total enterprise value of approximately $69 billion. Upon closing, AvalonBay shareholders will own approximately 51.2% and Equity Residential shareholders will own approximately 48.8% of the combined company on a fully diluted basis.
Benjamin Schall, president and chief executive officer of AvalonBay, will hold the same titles with the combined company, which will have dual headquarters in Chicago and Arlington, Virginia. Mark J. Parrell, who served as CEO of Equity Residential for eight years and at the company for 27 years, will retire at the close of the transaction. A full management team will be announced prior to closing.
A new board of trustees will initially consist of seven existing trustees of Equity Residential and seven existing directors of AvalonBay. Steve Sterrett, current lead independent trustee of Equity Residential, will serve as chairman while David Neithercut, current non-executive chairman of Equity Residential, and Tim Naughton, current non-executive chairman of AvalonBay, will each serve as trustees of the combined company.
“This combination creates a new and fundamentally stronger company with differentiated capabilities that will drive structurally superior cash flow generation, earnings and dividend growth, and value for shareholders,” said Schall. “As one of the country’s leading developers of new apartments across our regions, we will directly increase the supply of both market rate and affordable housing. Drawing on the foundational strengths and industry-leading teams across both of our organizations, our ambition is to redefine leadership in rental housing for the benefit of residents, associates, and shareholders.”
“We are excited to partner with AvalonBay to continue Equity Residential’s history of relentlessly seeking opportunities to create value for shareholders,” said Parrell. “The combined company’s investors will benefit from accelerated growth from increased investment in operational innovation; a larger, self-funded development platform; and the variety of other value creation opportunities that world class scale affords. This, together with our similar cultures that prioritize exceeding the expectations of our employees and residents, positions the combined company to create exceptional value for its shareholders, customers and employees.”
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