Phillips Edison Entities to Merge, Creating $6.3 Billion Grocery Center REIT

Phillips Edison & Co. owns Berry Town Center (pictured), a 99,441-square-foot, Publix-anchored center in Davenport, Florida. The merger will create a combined portfolio of 323 grocery-anchored centers across 33 states. Phillips Edison & Co. owns Berry Town Center (pictured), a 99,441-square-foot, Publix-anchored center in Davenport, Florida. The merger will create a combined portfolio of 323 grocery-anchored centers across 33 states.

Cincinnati — Phillips Edison & Co. Inc. (PECO) has entered into a definitive merger agreement with Phillips Edison Grocery Center REIT II, a publicly traded REIT currently advised and managed by PECO.

The combined company will have a total enterprise value (TEV) of $6.3 billion.

The transaction is a 100 percent stock-for-stock merger valued at $1.9 billion. REIT II currently has 86 properties in its portfolio. The merger will create a national portfolio of 323 grocery-anchored shopping centers spanning approximately 36.7 million square feet across 33 states.

“We are certain this highly complementary business combination is in the best interests of REIT II shareholders,” said David Garrison, chair of the special committee of REIT II’s board of directors. “It better positions REIT II and the combined company for liquidity and provides REIT II shareholders with the benefits of a company with an enhanced growth profile, lower leverage and the efficiencies of size and scale.”

The merger will include REIT II’s 20 percent ownership interest in Necessity Retail Partners, a joint venture with TPG Real Estate that currently owns 14 grocery-anchored shopping centers.

In exchange for each share of REIT II common stock, REIT II shareholders will receive 2.04 shares of PECO common stock, which is equivalent to $22.54 per share based on PECO’s most recent estimated value of $11.05 per share. REIT II will not pay any internalization or disposition fees in connection with the transaction.

Following the closing of the transaction, PECO shareholders are expected to own 71 percent of the combined company, and the former REIT II shareholders are expected to own 29 percent. Two of the three REIT II independent directors will join the board of the combined company, which will include seven directors.

“This transaction creates one of the largest pure-play grocery-anchored shopping center portfolios, building on our belief that grocery-anchored shopping centers are the strongest and most resilient assets in retail real estate,” said Jeff Edison, chairman and CEO of REIT II. “This transaction will enhance the long-term value and liquidity opportunities for our shareholders.”

The transaction is expected to close in the fourth quarter.

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