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Education Realty Trust EDR, also known as EdR, has entered into a definitive merger agreement, per which, it will be acquired by Greystar Student Housing Growth and Income Fund, LP — a newly-formed, perpetual-life fund — in an all-cash transaction of $4.6 billion, including debt.
EdR’s stockholders will receive $41.50 per share in cash, representing a premium of 13.6% over its closing price on May 31, 2018 — prior to the day when speculations of a possible sale of the company started making rounds in the market.
Importantly, EdR will discontinue its regular quarterly dividends. Nonetheless, if the transaction is completed after Oct 15, 2018, EdR stockholders will be entitled to receive 0.435 cents per share of per diem amount for each day from Oct 15 until the closing date.
This deal, subject to fulfilment of customary closing conditions, is expected to close in the second half of 2018. The merger is also conditioned upon the approval of EdR’s stockholders, who are yet to vote on the will transaction at a special meeting. However, the transaction is not contingent on receipt of financing by Greystar.
Per the terms of the deal, Greystar, in a joint venture with the real-estate unit of Blackstone, will also buy a portfolio of EdR’s off-campus student housing assets situated adjacent to best-in-class university campuses. The real-estate unit of Blackstone will acquire a portfolio of income-generating properties, worth $10 billion, concentrated in the U.S markets offering decent growth opportunities.
Furthermore, the Greystar-led fund has acquired a letter of commitment for the debt financing of the merger from JPMorgan Chase Bank, N.A. — a subsidiary of JPMorgan Chase & Co. JPM.
The above-mentioned alliance will enable EdR to maximize the company’s shareholders’ value by providing an impressive premium over its share price. In fact, since the change in the company’s management, effective Jan 1, 2010, EdR stockholders have enjoyed total return of 293%. Additionally, based on the company’s outstanding shares as of May 1, 2018, the transaction has an equity value of $3.15 billion.
Moreover, this Zacks Rank #3 (Hold) stock has rallied 30.5% in the past three months, outperforming 9.2% growth recorded by its industry.
Stocks Worth a Look
A few better-ranked stocks from the same space include Columbia Property Trust, Inc. CXP and Extra Space Storage EXR. Both stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Columbia Property Trust’s FFO per share estimates for 2018 have remained unchanged at $1.46 over the past month. The stock has gained 12.5% during the past three months.
Extra Space Storage’s Zacks Consensus Estimate for 2018 FFO per share have remained unchanged at $4.62 in the past month. Its shares have returned 16.9% in three months’ time.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs
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