Savills acquisition of Studley, Inc.

01 May 2014

Savills plc (Savills), one of the world’s leading real estate advisory firms, is pleased to announce the proposed acquisition of Studley, Inc. (Studley), the leading independent commercial real estate services firm specialising in tenant representation in the United States (US), for up to US$260 million (£154 million), payable in instalments between completion and 31 May 2017 in cash, promissory notes and ordinary shares of Savills.

Founded in 1954 and headquartered in New York City, Studley is a privately owned firm that focuses principally on the needs of tenants to provide clients with innovative tenant representation, project management and transaction advisory services. Studley employs over 400 commissioned brokers and 175 support staff in 25 offices across the US. Its largest offices in New York City, Washington DC, Southern California (LA), Chicago and Houston collectively represent the majority of Studley’s revenues. In addition to occupier-related services, Studley has a respected capital markets team based principally in New York City. Since successfully completing a management-led buyout in 2002, the firm has been owned by its 139 partners.  A majority of the senior brokers have been with Studley for more than 15 years.

The acquisition of Studley will provide Savills with a significant US footprint and a strong platform for further growth both in the US and through Savills existing businesses in Asia and Europe. The combination of the businesses will strengthen Savills position as a leading advisory business focused on the world’s key cities and capable of offering clients a broad suite of transaction advisory and project management services.

For the year ended 31 December 2013, Studley's turnover was US$233 million, adjusted EBITDA was US$18.4 million and profit before tax was US$6.0 million (unaudited). Performance in the first quarter of 2014 has shown a material improvement on the same period in 2013. In addition, Studley owns a 49% stake in AOS Studley, a French, EMEA-focused tenant representation and project management business.  From completion this investment will be held as an asset for sale on the Studley balance sheet. Studley's gross assets, including the AOS investment, as at 31 December 2013 were US$113 million (unaudited).

The transaction will be implemented by way of a Merger Agreement, under the terms of which Savills will pay up to US$260 million in cash, promissory notes and shares for Studley, which represents a present value of US$224 million (at Savills weighted average cost of capital) reflecting the substantial deferred element of the consideration. The form and structure of the proposed consideration is as follows:

  • initial consideration of up to US$130 million. Approximately half of the initial consideration will be in the form of up to 6.1 million new ordinary shares of Savills (with a value of up to US$65 million, at the volume weighted average price over the 20 trading days before this announcement) to be issued to vendor shareholders in three equal annual instalments commencing on the first anniversary of completion. The balance of the initial consideration will be paid in cash on completion; and
  • promissory notes with a face value of up to US$130 million, with US$60 million of such notes payable on the first anniversary of completion and up to US$70 million on the third anniversary of completion. The majority of the noteholders will be vendor shareholders who will be paid the face value of the third anniversary notes only if they remain actively engaged in the business at the payment date.

In addition, Studley's staff will be eligible for a performance related cash payment of up to US$25 million in March 2018, subject to the achievement of certain earnings growth targets measured over the three financial years to 31 December 2017.

The cash portion of the initial and deferred consideration will be funded from Savills cash and banking facilities.

The transaction provides Savills with a strong platform in the US from which it can continue to grow its business. It will also leverage and strengthen Savills global platform, including its leading transaction advisory, consultancy, property and facilities management and investment management businesses.  There are expected to be some limited integration savings, principally in relation to property costs, associated with the combination of Savills current capital markets businesses in New York City, Washington and Southern California, into the Studley organisation.

After the acquisition, the Group will operate in the US under the Savills Studley brand name and existing Savills branding arrangements will continue for the rest of the world. Studley’s Chairman & CEO, Mitchell Steir, and President, Michael Colacino, will both act as alternates on the Savills Group Executive Board. In addition, Mitchell will continue as Chairman & CEO, and Michael as President, of Savills Studley.

The merger, which is subject to a vote of Studley stockholders, is expected to close on or around 30 May 2014, subject to the expiration of the notice period under the US Hart-Scott-Rodino Antitrust Improvements Act as well as other customary closing conditions, including Savills satisfaction as to the level of acceptance by Studley shareholders. As at today's date, Savills has received irrevocable undertakings to vote in favour of the transaction from holders of 78% of the shares of Studley. The transaction is anticipated to produce an internal rate of return materially above Savills weighted average cost of capital and is expected to enhance Savills underlying earnings per share in the first year.

Jeremy Helsby, Group Chief Executive of Savills, said:

"Studley is recognised for its exceptional tenant representation expertise and is the leading player in markets throughout the United States.  The combination of Studley and Savills represents a unique opportunity which not only provides us with a significant platform for growth in the US, but also enhances our offering to clients worldwide allowing us to provide a truly global service.”

Mitchell Steir, Chairman & CEO of Studley, added:

“This is a great opportunity for us to build on our strong position in the market and benefit from being part of one of the leading global brands in the industry.

We are delighted that we will have a stronger platform to continue our growth with a partner that shares our commitment to exceptional client service.  Studley and our clients will benefit from being part of an international firm with the ability to capitalise on cross border opportunities in Europe and Asia.”

For further information please contact:

Savills          Tel: +44 20 7409 8934 
Jeremy Helsby, Group Chief Executive
Simon Shaw, Group Chief Financial Officer

Studley         Tel: +1 212 326 1000 
Mitchell Steir
Michael Colacino

Tulchan Communications      Tel: +44 20 7353 4200
Peter Hewer
Will Smith

 

 
 

General Enquiries

Savills Margaret Street

 

Key Contacts

Jeremy Helsby

Jeremy Helsby

Chief Executive Officer Plc Central Management

Savills Margaret Street

+44 (0) 20 7409 8947

 

Simon Shaw

Simon Shaw

Chief Financial Officer Plc Central Management

Savills Margaret Street

+44 (0) 20 3107 5420