On Monday, defunct investment banker Lehman Brothers Holdings announced that it is selling its Archstone Enterprise LP real estate business to a pair of buyers. Residential real estate investment trusts Equity Residential (NYSE:EQR) and AvalonBay Communities (NYSE:AVB) will pay a combined $6.5 billion in cash and stock to acquire the business.
Earlier this year, Lehman purchased the 53.6% of Archstone shares that it didn't already own, in order to fully control the company and facilitate its later sale. Now, Lehman will be selling the company for $2.685 billion in cash, 34,468,085 shares of Equity Residential common stock, and 14,889,706 shares of AvalonBay common stock. When the transaction is consummated, as it is expected to be in the first quarter of 2013, Equity Residential will own 60% of Archstone, with AvalonBay owning the remaining 40%.
Thus, in essence, Lehman is trading 100% of one company for a 9.8% ownership interest in Equity Residential, a 13.2% interest in AvalonBay, and, of course, the cash. Lehman says the sale "has generated immediate and considerable proceeds for our next distribution to creditors."
In related news, Equity Residential announced today that it is selling 19 million shares in a follow-on offering, in part to raise cash to pay its portion of the Archstone payment.