Blog Coverage Tricon Acquires Silver Bay for $1.4 Billion; Plans to Bank on the Single-Family Rental Segment
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LONDON, UK / ACCESSWIRE / March 1, 2017 / Active Wall St. blog coverage looks at the headline from Silver Bay Realty Corp. (NYSE: SBY) as the Company announced on February 27, 2017, that it has entered into a definitive agreement, pursuant to which Tricon Capital Group Inc., will acquire Silver Bay for approximately $1.4 billion. Silver Bay's stockholders are entitled to receive $21.50 per share for each outstanding share of the common stock. Register with us now for your free membership and blog access at:
One of Silver Bay Realty's competitors within the REIT - Residential space, Camden Property Trust (NYSE: CPT), reported on February 07, 2017, its operating results for the three and twelve months ended December 31, 2016. AWS will be initiating a research report on Camden Property Trust in the coming days.
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This transaction is structured as a merger of a subsidiary of Tricon American Homes and Silver Bay. Post the completion of the merger, Silver Bay's stockholders will receive the $21.50 price, which represents a 22.3% premium to Silver Bay's 20-day weighted average trading price as of February 24, 2017. Tricon plans to finance the transaction from one or more ‘bought deal' public offerings, the details of which it plans to release shortly.
Tricon has received a commitment from Royal Bank of Canada to increase the net corporate revolving credit facility, subject to completion of the acquisition, from $235 million to $350 million where it expects to draw approximately $70 million on the facility to finance a portion of the net acquisition price of $1.4 billion. The remainder of the purchase price and amounts required to furnish the existing debt and pay transaction costs will be drawn on a new Tricon warehouse credit facility. Tricon additionally, has obtained a commitment from Deutsche Bank AG and its affiliates for the new facility for an aggregate amount of about $1.2 billion.
Highlights of the Transaction
This transaction has been unanimously approved by both Companies where it is expected to close by the end of Q2 FY17. This proposed acquisition is viewed as a transformational event for Tricon where the transaction will be more than double the size of Tricon American Homes. The highlights of the transaction include:
Transformational acquisition for Tricon will create the fourth largest publicly-owned single-family rental Company in the US, with over 16,800 homes where the focused areas would include US Sun Belt and the Middle Market.
The collaboration of two geographically complimentary Single-family rental portfolios where the transaction is expected to unlock multiple substantial operating benefits and efficiencies.
This agreement is expected to be accretive to Tricon's EPS and net asset value per share while banking on the expected strong funds from Operations profile, home price appreciation, and cost synergies.
The transaction will act as a catalyst for Tricon's strategy to simplify the business model while focusing on scale and industrial leadership in select housing verticals.
Prospects of the Agreement
This acquisition is set to scale Tricon as a major SFR (Single-family rental) operator in the US with over 16,700 homes. At the closing of the transaction, the combined Company will operate in 18 markets, which includes six markets with a minimum of 1,000 homes and ten markets with a minimum of 500 homes, which would result in enhanced growth and market density, hence resulting in meaningful operating cost savings. The acquisition will further simplify Tricon's Business model and the Company believes that it can maximize shareholder value by focusing on complementary residential real estate verticals and eventually, establish it as the industry leader. Tricon recently announced its Q4 FY16 and full-year FY16 results where the net income for Q4 FY16 stood at $9.0 million, declining from $28.8 million for Q4 FY15. For the 12-month period ending December 31, 2016, Tricon reported net income of $59.8 million for full-year FY16 against the $58.5 million benchmark for fully-year FY15.
Silver Bay will eventually receive $600 million to repay its debt and liabilities under this agreement. It views the agreement as an immediate value to shareholders where the Company expects to drive growth through its well-crafted portfolio of single family properties.
Stock Performance
On Tuesday, February 28, 2017, the stock closed the trading session at $21.53, surging 18.49% from its previous closing price of $18.17. A total volume of 14.61 million shares have exchanged hands, which was higher than the 3-month average volume of 199.98 thousand shares. Silver Bay Realty's stock price advanced 29.08% in the last month, 23.83% in the past three months, and 61.64% in the previous twelve months. Furthermore, since the start of the year, shares of the Company have soared 25.61%. The stock has a dividend yield of 2.42% and currently has a market cap of $761.30 million.
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