Three’s company

4 June 2016 By Jeffrey Goldfarb Follow @jgfarb

Two years after NorthStar Realty separated a business to “unlock value,” they’re reuniting and getting into bed with Colony for a three-way merger of equals. Savings and scale could heat up the relationship. Investors might, however, expect such fickle lovers to fall out again.

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NorthStar Asset Management, Colony Capitaland NorthStar Realty Finance said on June 3 they would combine in all-stock merger of equals to create a real-estate investment trust with some $58 billion in assets under management.

NSAM shareholders, who will receive a special cash dividend of $128 million, will own about 32.85 percent of the combined company, to be called Colony NorthStar. Colony shareholders will own about 33.25 percent and NRF shareholders will own about 33.9 percent.

Under the terms of the deal, NSAM shareholders will own one common share of Colony NorthStar for each NSAM share already owned. Colony shareholders will receive 1.4663 common shares of Colony NorthStar stock for each Colony share, while NRF shareholders will receive 1.0996 Colony NorthStar common shares for each NRF share.

Colony NorthStar’s board will have 13 directors, six nominated by NSAM and NRF, six nominated by Colony and one additional board member agreed upon by existing directors at all three companies.

The companies expect $115 million in annual cost savings from the transaction, consisting of about $80 million in cash savings and $35 million from stock-based compensation.

Colony Chairman Thomas Barrack will be chairman of Colony NorthStar, Colony Chief Executive Richard Saltzman will be CEO and David Hamamoto, chairman of NSAM and NRF, will be vice chairman.

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