Rouse unveils deal to buy most of Trizec's stake

September 15, 1992|By Timothy J. Mullaney | Timothy J. Mullaney,Staff Writer

The Rouse Co. of Columbia unveiled a $114 million deal yesterday to buy out most of the stake of its biggest stockholder, Canadian real estate giant Trizec Corporation Ltd., which is trying to raise capital and slash its nearly $10 billion in long-term debt.

The transaction has been in the works for months, and Rouse's announcement yesterday said it would be completed this week. Rouse would pay $12 million to buy back 1 million of the 11 million common shares owned by Trizec, while seven institutional investors would buy 8.5 million, also for $12 a share.

Trizec will retain 1.5 million common shares, but its four representatives will leave Rouse's board of directors. It is also slated to get warrants allowing it to buy 500,000 Rouse shares at $18 a share within five years as part of yesterday's deal.

Trizec will still own 8.6 percent of Rouse on a fully diluted basis, reflecting both its 1.5 million shares of Rouse common and $85 million of Rouse debentures owned by Trizec, said Trizec spokesman Doug Evans.

The deal extricates Rouse from the remote risk that the stock could be dumped on the market because of the financial troubles of Canadian development giant Olympia & York, which owns a quarter of Trizec's stock.

"It removes a significant point of uncertainty and lets people evaluate Rouse on its own merits," said Clifford F. Ransom II, an analyst who follows Rouse for the institutional research department of Ferris Baker Watts Inc. in Baltimore.

Indeed, Rouse's oft-beleaguered stock rose sharply on the news. Rouse closed up $2.75 a share at $14.50 on over-the-counter volume of 199,800 shares. The stock has fallen more than 50 percent since 1989.

Rouse investor relations director David Tripp said the stock bounced up partly because the market was relieved to see the stock sold at a reasonable price to institutional investors already familiar with Rouse and its prospects.

He said all the buyers already own Rouse stock or other Rouse securities.

Rouse didn't say who agreed to buy the 8.5 million Rouse shares that Trizec is selling to groups other than Rouse itself.

Mr. Evans said Trizec first bought a 20 percent interest in Rouse in 1981 in hopes of eventually merging Rouse with Trizec's western U.S. mall development operation, the Hahn Co. California-based Hahn is now the major partner in Towson Town Center.

"We both had a dream to put Rouse and Hahn together," Mr. Evans said. "It wasn't working out the way we hoped."

Frank Mayer, who follows Trizec for the investment firm BBN James Capel in Toronto, said Calgary-based Trizec has been pinned down by a subsidiary's problems with home building and land development businesses that have been hurt by weak housing markets in Ontario and California. Trizec, while still profitable, sold much of its Rouse investment to get cash, he said.

Mr. Evans confirmed that Trizec sought to sell most of its Rouse shares. He said Trizec wants to raise $1 billion this year to reduce debt and come up with capital for expansion, and the deal to cut its Rouse stake is part of that plan. Trizec is the biggest publicly traded real estate company in North America.

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