FINANCE: Savills has bought US property services firm Studley in a $260m (£154m) cash, share and promissory note deal.
The transaction for the privately owned New York-headquartered firm which specialises in tenant representation is structured to comprise $130m of initial consideration in cash and shares plus $130m of promissory notes.
The deal, for the firm which has 400 commissioned brokers across 25 US offices, is scheduled to be completed at the end of May with payments running until 31 May 2017.
Savills will issue 6.1m shares valued at up to $65m – representing half of the initial consideration – to Studley shareholders in three equal annual instalments beginning May 2015.
The balance of the initial consideration will be paid in cash on completion.
The $130m promissory notes will be split between a $60m payment on 31 May 2015 and up to $70m on the third anniversary of completion in 2017.
The majority of the noteholders will be Studley shareholders who will be paid the face value of the third anniversary notes only if they remain actively engaged in the business at the payment date.
In addition, Studley’s staff will be eligible for a performance-related cash payment of up to $25m in March 2018, subject to the achievement of certain earnings growth targets measured over the three financial years to 31 December 2017.
The cash portion of the initial and deferred consideration will be funded from Savills’ cash and banking facilities.
Savills said the acquisition will provide it with a significant US footprint and a strong platform for further growth both in the US and through Savills’ existing businesses in Asia and Europe.
Studley’s largest offices in New York City, Washington DC, Southern California, Chicago and Houston collectively represent the majority of Studley’s revenues.
In addition to occupier-related services, Studley has a respected capital markets team based principally in New York City.
Since successfully completing a management-led buyout in 2002, the firm has been owned by its 139 partners. A majority of the senior brokers have been with Studley for more than 15 years.
For the year ending 31 December 2013, Studley’s turnover was $233m, adjusted EBITDA was $18.4m and profit before tax was $6m (unaudited).
Performance in the first quarter of 2014 has shown a material improvement on the same period in 2013.
In addition, Studley owns a 49% stake in AOS Studley, a French, EMEA-focused tenant representation and project management business.
From completion this investment will be held as an asset for sale on the Studley balance sheet. Studley’s gross assets, including the AOS investment, as at 31 December 2013 were US$113 million (unaudited).
After the acquisition, the group will operate in the US under the Savills Studley brand name and existing Savills branding arrangements will continue for the rest of the world.
Studley’s chairman & chief executive, Mitchell Steir, and president, Michael Colacino, will both act as alternates on the Savills group executive board.
In addition, Mitchell will continue as chairman and CE, and Michael as president, of Savills Studley.
The merger is subject to a vote of Studley stockholders. Savills has received irrevocable undertakings to vote in favour of the transaction from holders of 78% of the shares of Studley.
The transaction is anticipated to produce an internal rate of return materially above Savills weighted average cost of capital and is expected to enhance Savills underlying earnings per share in the first year.
Jeremy Helsby, group chief executive of Savills, said: “Studley is recognised for its exceptional tenant representation expertise and is the leading player in markets throughout the US.”
Steir added: “Studley and our clients will benefit from being part of an international firm with the ability to capitalise on crossborder opportunities in Europe and Asia.”
bridget.oconnell@estatesgazette.com
