Originally created 07/10/98

Deal to boost value of stock



Merry Land & Investment Co.'s $2.2 billion deal with Chicago-based Equity Residential Properties was made to create more shareholder value, Merry Land officials said Thursday.

The deal, however, may cause some local employees to lose their jobs.

"In the last three years or so, our stock price has been relatively flat, at a time when the stock market has made a whole lot of progress. We did not, in general, enjoy such a lead," said W. Tennent Houston, Merry Land's president and chief executive officer.

In a bullish market, shareholder value is often the name of the game.

The merger, announced Wednesday, will give Merry Land investors 0.53 shares of Equity Residential stock for every Merry Land share and one share of Merry Land Properties -- a smaller, spinoff corporation -- for every 20 shares of Merry Land.

The deal is subject to shareholder approval.

The sale gives Merry Land shareholders about a 20 percent premium, based on the average price of both companies' stock in the past month, Merry Land officials said. It also could allow shareholders to benefit from the more regionally diverse holdings of Equity Residential, the largest publicly traded apartment company in the nation.

Merry Land and Equity Residential officials don't know how many employees will lose their jobs. Mr. Houston expects at least half of the 75 corporate office employees to be retained in Augusta. Some of the employees may be offered jobs in positions elsewhere in Equity Residential, he said.

Mr. Houston and Michael Thompson, Merry Land's chief operating officer, held a two-hour meeting with corporate-office employees Thursday.

Merry Land officials expect all the company's 900 employees working outside Augusta to be retained by Equity Residential at their current pay.

Part of the reason Merry Land's stock has been flat, Mr. Houston said, is that high levels of construction in the South have caused a drop in rents, while plentiful credit has led to higher prices for existing apartment communities. These conditions put pressure on stock prices.

In addition to the apartment construction boom, low interest rate mortgages are driving a housing boom and have spurred some renters to become homeowners.

Merry Land officers anticipated these conditions would persist.

The merger exemplifies a recent trend toward consolidation.

"We have always known that consolidation was the most dominant force," Mr. Houston said. "We expected to be an acquirer; clearly not everyone can be an acquirer -- in this case we were not."

In time, Mr. Houston said, he expects the number of apartment real estate investment trusts to dwindle to about six.

Under the merger plan, a new corporation -- Merry Land Properties Inc. -- will be spun off. The smaller company will develop five apartment complexes in the Southeast, and retain ownership of five apartment complexes in Savannah and Charleston, S.C., five commercial buildings downtown, including the corporate office and 5,000 acres of land.

Assets are estimated at $63 million.

The new company will focus on property investment, development, management and rehabilitation. It will operate out of Merry Land's current offices, and employ 10 to 15 people.