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Why Is Mid-America Apartment Buying Post Properties?

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Rationale for the merger

As we saw in the first part of this series, Mid-America Apartment Communities (MAA) is buying Post Properties (PPS) in a $4.5 billion stock transaction to create the largest publicly traded apartment REIT.

This is a largely complementary transaction that will create a Sunbelt-focused property company. The companies are focused on the highest growth sections in the US. The companies expect ~$20 million in annual synergies.

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Management’s comments

H. Eric Bolton, Jr., Mid-America’s chairman and CEO, said that “The combination of MAA and Post will establish the leading apartment real estate platform focused on the high-growth Sunbelt region of the country with significant competitive advantages to drive superior value for our shareholders, residents and employees. The combined company will capture a broader market and submarket footprint, with improved rental price-point diversification that will support an enhanced level of performance over the full real estate cycle. Further, the Post development platform, with a strong history of value accretive new development, supported by the newly combined company platform, will expand external growth and accretive capital recycling opportunities for MAA.”

David P. Stockert, Post Properties’ CEO and president, said that “This merger redefines the combined company in terms of product, capability and capacity for consistent growth. Its unique position in the apartment REIT space and strength of its financial position should drive an advantageous cost of capital and value for shareholders of both companies. Post shareholders are receiving an attractive value for our assets and business and a 24 percent increase in the dividend, while preserving the continuing opportunity to participate in the combined company’s ongoing success.”

Other merger arbitrage resources

Other important merger spreads include the merger between Valspar (VAL) and Sherwin-Williams (SHW). For a primer on risk arbitrage investing, read Merger Arbitrage Must-Knows: A Key Guide for Investors.

Investors who are interested in trading in the REIT sector can look at the Vanguard REIT ETF (VNQ).

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