Equity One to Acquire Unit - Analyst Blog

On Sunday, Equity One Inc. (EQY) announced its plan to acquire Capital & Counties USA Inc. in a $600 million transaction through a joint venture (JV) with the parent company, Capital Shopping Centres Group plc (“CSCG").

 

Under the terms of the agreement, CSCG will receive 4.1 million Equity One common shares and 10.9 million JV units worth $258.3 million at Equity One’s closing stock price of $17.22 on Friday. The JV units can be redeemed for Equity One common stock on a one-for-one basis or cash, at Equity One's option. Equity One will also assume $330 million of mortgage debt.

 

The deal is expected to close late in the third quarter of 2010, subject to customary closing conditions.

 

It is anticipated that the deal would add moderately to Equity One's funds from operations in the first year, before one-time transaction expenses and non-cash purchase accounting adjustments.

 

Equity One expects to incur one-time transaction expenses of about 5 cents per share in 2010. Excluding those expenses and given the timing of closing, the company reiterated its prior 2010 outlook for funds from operations in the range of $1.00 to $1.08 per share.

 

CSCG owns 15 California properties with 2.6 million square feet of space concentrated in the San Francisco Bay Area. According to Equity One, 70% of the portfolio consists of retail assets, while the rest includes medical office, office, undeveloped land and multifamily properties located in the Bay Area and Los Angeles. The company intends to dispose a majority of these non-core assets.

 

David Fischel, the CEO of Capital Shopping Centres, will join Equity One’s board of directors following the closing of the transaction. The transaction allows CGCG to focus on core business in the United Kingdom providing a growth platform for Equity One.

 

Goodwin Procter acted as legal counsel and Eastdil Secured acted as financial advisor to Equity One. Skadden Arps acted as legal counsel and Bank of America Merrill Lynch acted as financial advisor to Capital Shopping Centres.

 

Last week, Equity One’s closest competitor Kimco Realty Corporation (KIM) announced a new joint venture with BIG Shopping Centers (“BIG"), an Israeli publicly traded company, to acquire high quality neighborhood and community shopping centers throughout the United States. The initial investment was $68.8 million, which included two former PL retail properties that Kimco purchased during the fourth quarter of 2009.

 

The latest acquisition is part of Equity One’s strategic plan to enter into California, helping in the company’s geographic diversification and tenant base and expanding its redevelopment pipeline. Upon completion of the transaction, Northern California will be Equity One’s second largest market after South Florida, representing approximately 16% of its asset value.