Originally created 07/09/98

Apartment giant to buy Merry Land



Another company is about to be swallowed up in the rapidly shrinking world of real estate investment trusts. Equity Residential Properties Trust and Merry Land & Investment Co. Inc. announced Wednesday that the two companies will merge.

Chicago-based Equity Residential, the largest publicly traded apartment company in the nation, will purchase Augusta-based Merry Land in a $2.2 billion deal that includes a tax-free stock purchase, a taxable dividend in the form of shares of stock in a newly created corporation and the assumption of about $656 million in debt.

For each Merry Land share of common stock, Merry Land shareholders will receive 0.53 shares of Equity Residential stock.

Twenty shares of Merry Land common stock will be exchanged for a share in the new corporation.

To pay for the deal, Equity Residential will issue 23.6 million shares of common stock.

The merger, approved by Equity Residential's board of trustees and Merry Land's board of directors, is subject to shareholder approval. The proxy is expected to be mailed to shareholders in October, and the deal could close by late November.

Merry Land shares closed Wednesday at 23, up 11/16 from 22 5/16. At one point during the day, the stock traded as high as $24. Equity Residential was down 7/16 to 46 11/16 from 47 1/8.

The Merry Land deal is the latest in a string of acquisitions for Equity Residential.

"As we predicted, REITs are consolidating and evolving," Equity Residential Chairman Samuel Zell said in a prepared statement. "Size and liquidity equal greater value in the marketplace and large organizations, like Equity, are able to capitalize on the opportunities not available to small companies."

The companies responded to calls with a joint news release.

The status of Merry Land's properties and employees, however, and the mission of the newly created corporation that the merger deal will create were not addressed in the release.

The merger exemplifies the industrywide trend toward consolidation.

Because of the advantaged tax status, hundreds of REITs went public in the early 1990s. Now many of the less successful REITs are being bought by larger REITs, analysts say.

Created in the 1960s, REITs are different from conventional public stock corporations in that they pay little or no federal corporate income tax. Instead, they are required by law to distribute 95 percent of their taxable income as dividends. There are about 300 REITs nationwide.

The five series of Merry Land preferred stock will be exchanged for five new series of Equity Residential preferred shares. The conversion rate of Merry Land's convertible preferred shares will be adjusted upward about 1.88 percent to account for the special divided and subsequently adjusted for the 0.53 common share exchange ratio.

Merry Land's portfolio, which includes 118 apartment complexes in nine states with 34,990 units, will be integrated into Equity Residential's holdings of 538 properties in 35 states with 152,553 units. The merged company will operate under the Equity Residential name and be headquartered in Chicago.

In addition to its headquarters located on Ellis Street, Merry Land owns four apartment complexes and other rental properties in Augusta.

"Our premier apartment portfolio attracted the interests of several suitors, however, Equity Residential offered the most appealing platform for growth and long-term value for our shareholders," Merry Land Chairman Boone A. Knox said in the statement. "Our properties, extending from Washington, D.C., south through Texas, will enhance the quality and scope of Equity's established national portfolio. This merger enables Merry Land to fulfill our market growth objective two years ahead of schedule."

Originally a subsidiary of one of the largest brick manufacturers in the nation, Merry Land became an independent, public company in 1981 and elected REIT status in 1987. Since 1991, the company has invested more than a billion dollars in apartments.

Merry Land focused on an aggressive expansion strategy earlier this year, buying about 4,000 apartments in Florida from Trammell Crow Residential, a national apartment management company.

Merry Land -- one of the largest, publicly traded companies based in Augusta -- could become the latest home-grown company to be bought. Recent acquisitions include the purchase of drill bit manufacturer Greenfield Industries by Pennsylvania tool maker Kennametal Inc., Aiken's Palmetto Savings Bank by Regions Financial, and Osbon Medical Systems by Imagyn Medical Technologies.

"It's a loss," said Kevin Shea, senior vice president at the Metro Augusta Chamber of Commerce. "The fact that we have a company headquartered here allows us to have more influence on company policy."

The prepared statement released Wednesday by Equity Residential and Merry Land said a new corporation created by the merger will be managed by W. Tennent Houston, Merry Land's president and chief executive officer, and Michael Thompson, Merry Land's chief operating officer.

The statement did not mention the new corporation's name, mission or location, only that it would offer shareholders "an attractive way to invest in the coastal real estate markets of the South."