Bank of America (BAC) and Barclays Bank will sell their remaining 26.5% interest in Archstone, operator and developer of multifamily apartment properties, to Lehman Brothers Holdings.
The $1.58 billion transaction is expected to close in the first half a June.
Apartment developer Equity Residential (EQR) entered into an agreement with BofA and Barclays to purchase the remaining 26.5% interest in Archstone for $1.58 billion in cash. Upon the closing of Lehman’s acquisition of the Archstone interest, Equity Residential will receive $150 million in break-up and termination fees after exercising its option to purchase the Archstone interest. Lehman will then acquire that interest under its right of first offer.
If Lehman does not close, Equity Residential’s contract with BofA and Barclays to purchase the interest will remain in effect.
In the first quarter, Equity Residential and the Archstone sellers agreed to a 60-day extension of the purchase. In April, the parties agreed to an additional extension, with Equity Residential having the exclusive right, until May 21, to purchase the remaining interest at a price equal to $1.5 billion or more.
The bankruptcy estate of Lehman Brothers matched that offer, causing Equity Residential to earn the breakup fee.
However, should Equity Residential acquire all of Archstone within 120 days of Lehman’s acquisition of the final 26.5%, under certain circumstances Equity Residential could be required to return all or a portion of the $150 million in break-up and termination fees.
Equity Residential is not in negotiations with Lehman regarding the acquisition of Archstone, but the agreement does not preclude the company from pursuing negotiations in the future.
Upon consummation of the transaction, BofA and Barclays will have sold a 53% controlling interest in Archstone for $2.91 billion. Archstone has net debt and third-party preferred securities of about $10.5 billion.