CB Richard Ellis Group To Buy Trammell Crow

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The New York Sun

CB Richard Ellis Group Inc. agreed to buy Trammell Crow Co. in a $1.8 billion deal that will create a commercial real estate services giant.

CB Richard Ellis is paying $49.51 a share in cash, a 27% premium to the closing price of Trammell Crow’s shares Monday. Including assumed debt and transaction and integration costs, the companies said the deal is worth $2.2 billion. The transaction requires the approval of regulators and Trammell Crow shareholders and is expected to close late this year or early in 2007.

Trammell Crow shares rose 25% to $48.90 in very light pre-market trading Tuesday. CB Richard Ellis shares, which closed Monday at $28.22, had yet to trade pre-market.

CB Richard Ellis said the deal will lift its earnings per share by a percentage “in the low teens” when stripping out transaction and integration costs. It will also boost revenue from outsourcing activities to 18% of total revenue from about 8% currently.

“Our strategic objective has long been to create the market-leading commercial real estate services firm,” CB Richard Ellis said in a release. The company says it is already the world’s largest such firm by revenue.

CB Richard Ellis, which had a market capitalization of $6.3 billion at Monday’s close, plans to issue $2.2 billion of term loans to finance the transaction and will amend or refinance its existing $600 million revolving credit facility.

Standard & Poor’s has a long-term rating of BB+ on CB Richard Ellis, leaving the company one notch below investment grade. The outlook is stable. Moody’s Investors Service in April raised the company’s senior debt to Ba1, also one notch into junk, citing progress paying down debt.

As a result of the transaction, CB Richard Ellis said it will sell Trammell Crow’s stake of about 20% in British real estate services provider Savills PLC.

CB Richard Ellis will run Trammell Crow as an independent subsidiary and will retain the name. Trammell Crow Chief Executive Robert E. Sulentic will be given the job of group president with responsibility for the firm’s development and investment business and EMEA and Asian-Pacific operations.

Lazard Freres & Co. LLC advised Trammell Crow.


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