Tricon Capital Group Inc. (TSX: TCN), a principal investor and private equity fud managed focused on the residential real estate industry, has agreed to acquire Silver Bay Realty Trust Corp. (NYSE: SBY) at US $21.50 per Silver Bay share for a total enterprise value of approximately US $1.42 billion, including assumption of approximately US $600 million of Silver Bay debt (net of cash on hand).
Tricon’s current market capitalization is CDN $1.17B while Silver Bay has a market cap of US $643 million (as of February 27, 2107).
Silver Bay Realty Trust Corp., a publicly traded REIT, is focused on the acquisition, renovation, leasing and management of single-family properties for rental income and long-term capital appreciation. Silver Bay owns single-family properties in Arizona, California, Florida, Georgia, Nevada, North Carolina, Ohio, South Carolina and Texas. Silver Bay is headquartered in Plymouth, Minnesota.
To partially fund the acquisition, Tricon Capital has entered into an agreement with a syndicate of underwriters co-led by RBC Capital Markets and GMP Securities L.P. to issue CDN $150 million of subscription receipts and an agreement with a syndicate of underwriters led by RBC Capital Markets to issue US $150 million aggregate principal amount of extendible convertible unsecured subordinated debentures.
In addition, Tricon Capital has obtained a commitment from Royal Bank of Canada to increase its existing corporate revolving credit facility, conditional on the completion of the acquisition, from $235 million to $350 million and expects to draw approximately $70 million on the facility to finance a further portion of the acquisition price. Tricon has also obtained a commitment from Royal Bank of Canada for bridge acquisition financing in an amount equal to approximately $265 million.
The balance of the acquisition purchase price and amounts required to refinance Sliver Bay’s existing debt and pay transaction costs will be drawn on a new Tricon American Homes warehouse credit facility. Tricon has obtained a commitment from Deutsche Bank AG and its affiliates for the new facility in an aggregate amount of approximately $1.2 billion.
RBC Capital Markets is acting as the sole financial advisor to Tricon. Paul, Weiss, Rifkind, Wharton & Garrison LLP, Goodmans LLP and Goulston & Storrs PC are acting as legal advisors to Tricon in connection with the acquisition and proposed financing.
Goldman, Sachs & Co. acted as sole financial advisor to Silver Bay on the transaction. Orrick, Herrington & Sutcliffe LLP acted as legal advisor to Silver Bay.