CBRE, TCC Delve Into $2B-Plus Deal

The dowry keeps the CBRE headquarters in Los Angeles and the Trammell Crow Co.-branded development and investment HQ in Dallas. In a telling sign of the depth of the compromise measures, the Global Outsourcing HQ stays in Dallas--with a CBRE banner going up the flagpole. Beyond that, the honeymoon plans are still being fine-tuned to solidify the largest commercial real estate battalion in the world. When the dust settles, the merged companies will control nearly 10.5% of the US market share.

"We looked as carefully as we could as to how the businesses fit together," Calvin W. Frese Jr., CBRE president of the Americas, tells GlobeSt.com. "The fit in Texas seems terrific."

Frese says CBRE has long admired and stayed close to TCC as merger talk swirled around the Dallas-based legacy company. "Certainly, it's our responsibility to stay in close contact with our competition and we've done that," he says. "We've always looked at companies that are good strategic fits and good cultural fits. In this instance, it's only been the last few months that talks have intensified."

Frese explains that both companies "share space" in the corporate services or outsourcing arena, but the differing strengths are what make the merger so palatable. From CBRE's side of the deal, it's getting a kingpin in facilities management and property management and TCC is gaining on the transactions management side. "It's a combination that's most compelling," he says.

TCC chairman and CEO Robert E. Sulentic will lead the development and investment arm, a wholly owned subsidiary. At his side will be Jim Groch, Matt Khourie, Chris Roth and John Stirek. Headed to CBRE senior roles are Michael Lafitte, Bill Concannon and Diane Paddison, who will help to integrate the hierarchies.

"While we may have ideas," Frese says, "we have to get to know both sides and work through some issues."

CBRE is financing the all-cash deal with up to $2.2 billion in a senior-secured term loan from Credit Suisse and Credit Suisse Securities USA LLC and a max of $600 million from a revolving credit facility. CBRE also plans to lob a tender offer no later than Nov. 6 for all outstanding 9.75% senior notes due in 2010. The offer's closing is not a condition of the merger's consummation.

Unlike CBRE, TCC needs shareholder approval. Sulentic says the SEC proxy statement will be filed within days to set the process in motion. The company filed an 8K early this morning.

"The dealmaker from my standpoint is there is tremendous value to be created in combining these two companies, the capability for servicing our clients, opportunities for our people and a combined result in enough value creation that we were able to get a great value for our shareholders," Sulentic tells GlobeSt.com. Equally as important, the deal keeps the Trammell Crow legacy alive. "That was important for Dallas, important for Trammell Crow Co. and important for CBRE," he adds.

Sulentic says the merger shouldn't alter any of TCC's development ventures with partners like Des Moines-based Principal Financial Group. If anything, he believes the marriage presents synergies for the programs. Overall, the development pipeline totals $7 billion, with $4.8 billion under way nationwide.

"This transaction was the right opportunity, at the right time, with the right partner," Sulentic says in an SEC transcript of his conference call with TCC's employees in 71 offices worldwide. He describes the merger as a means to keep up with globalization and clients' growing needs.

"We are a people company," Sulentic says during the GlobeSt.com interview. "What they want us for is our people and the vast majority of the company will go forward with this combined enterprise. I think this as an outcome will serve the constituents well."