Stifel's John Guinee throws in the towel on his Sell rating, citing positive catalysts like the OPEC production cut deal, which should lead to new rig deployments by energy companies, which should be of benefit to Parkway's (NYSE:PKY) Houston office properties.
The combined company now trades under the Cousins symbol of CUZ, with Parkway (NYSE:PKY) owners receiving 1.63 shares of CUZ for each share of PKY they hold.
The spinoff of the Houston-based assets of the combined company into New Parkway (PKY) is set to be completed tomorrow, with a special stock dividend to all CUZ shareholders paid prior to the market open.
By dint of its soon-to-close merger with Parkway Properties (NYSE:PKY), Cousins Properties (NYSE:CUZ) will gain entry into the S&P MidCap 400 as of the close today. It will also have a classification change to Office REIT following the purchase.
Ranked near the bottom of the S&P MidCap 400, Community Health Systems (NYSE:CYH) will be pushed out of the index as that company's market cap is more inline with that of a small-cap stock.
Along with the merger of Cousins Properties (NYSE:CUZ) and Parkway Properties (NYSE:PKY) will be the spinoff of the Houston-based assets of the two. The record date for the spin of New Parkway will be Oct. 6, and distribution date will be the next day.
The spin will be accomplished via a pro rata dividend of one share of New Parkway for every eight shares of Cousins.
The deal allows investors in Parkway Properties (PKY +9.8%) and Cousins Properties (CUZ flat) to continue to be owners of Sun Belt office properties, but without exposure to energy-exposed Houston.
Of Cousins' $237M in annual NOI, Houston is responsible for 45%. Of Parkway's $242M, Houston is responsible for 29%. All Houston properties will be spun off into a new publicly traded REIT with $177M of annual NOI.
Dropping Houston, the merged company will operate in seven markets, with Atlanta accounting for 49% of square footage. Next up is Charlotte at 16%, then Austin at 12%. Other markets are Tampa, Orlando, Phoenix, and Miami.
Parkway Property (NYSE:PKY) owners will receive 1.63 shares of Cousins (NYSE:CUZ) stock for each share of Parkway they own, and will own about 48% of the combined company.
Immediately after the merger, the combined entity will spin-off the Houston-based assets of each company into a new publicly-traded REIT. The Houston company will begin operations with five Class A office properties - allowing investors a pure-play bet on an energy recovery. It will be led by Parkway CEO Jim Heistand.
Back to the merger: Annual net G&A savings are expected to be about $18M, but FFO per share neutral in 2017. The deals are expected to close in Q4.