Are Associated Estates Shareholders Getting Enough in the Buyout?

By Chris Lange Published Apr 22, 11:25AM EDT

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With every acquisition that comes out, there is always the question of whether shareholders get enough in the deal. When Associated Estates Realty Corp. (NYSE: AEC) announced that it was being acquired by Brookfield Asset Management Inc. (NYSE: BAM), it would appear that shareholders are getting a fair amount, considering Associated Estates’ long-term chart.

The acquisition news has put Associated Estates shares at an all-time high on the basic chart, but some investors may still be wondering if they are getting enough here. The stock looked more or less in line with the consensus analyst target of $24.86 prior to the news, and now the shares are trading just above the highest analyst price target.

Associated Estates made the announcement that its board of directors has unanimously approved a definitive merger agreement with Brookfield. This will be an all-cash transaction in which Brookfield will acquire all outstanding shares of common stock of Associated Estates for $28.75 per share. The transaction is valued at approximately $2.5 billion, including the assumption of debt.

For a little background: Brookfield is a global alternative asset manager with over $200 billion in assets under management. It also has over a 100-year history of owning and operating assets with a focus on property, renewable energy, infrastructure and private equity. Brookfield Property Group, Brookfield’s largest investment platform, comprises of sector-specific portfolios in the multifamily, office, retail, industrial and hotel sectors.

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According to Chairman and CEO Jeffrey I. Friedman:

In December 2014, we announced that our Board was undertaking a thorough business review with the assistance of our financial advisor. After analyzing the Company’s strategy, assets and other opportunities, including running a process involving a number of qualified potential buyers, the Board unanimously determined that this transaction is the best course of action to maximize shareholder value. We are pleased that Brookfield recognizes the value inherent in our income producing properties, development projects and the platform we have built. We are also excited that this transaction will deliver compelling, immediate and certain value to all Associated Estates shareholders.

A look at the chart for Associated Realty shows that the stock was trading in the range of $13 to $20 until the tail-end of 2014, then the stock came alive. Compared to the 50-day moving average of $24.21, shareholders are getting a premium of 18.8% with the acquisition. Also note that the highest price target from analysts was $28.

As for Brookfield, the company has been on a path of steady growth, shares have more than doubled within the past five years.

Wednesday morning, shares of Associate Estates were up about 16% at $28.44, in a 52-week trading range of $16.63 to $28.53. The stock has a consensus analyst price target of $24.86.

Brookfield shares were relatively flat at $55.57, in a 52-week range of $40.83 to $58.50. The consensus price target is $59.20.

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About the Author Chris Lange →

Chris Lange is a writer for 24/7 Wall St., based in Houston. He has covered financial markets over the past decade with an emphasis on healthcare, tech, and IPOs. During this time, he has published thousands of articles with insightful analysis across these complex fields. Currently, Lange's focus is on military and geopolitical topics.

Lange's work has been quoted or mentioned in Forbes, The New York Times, Business Insider, USA Today, MSN, Yahoo, The Verge, Vice, The Intelligencer, Quartz, Nasdaq, The Motley Fool, Fox Business, International Business Times, The Street, Seeking Alpha, Barron’s, Benzinga, and many other major publications.

A graduate of Southwestern University in Georgetown, Texas, Lange majored in business with a particular focus on investments. He has previous experience in the banking industry and startups.