JLL To Buy HFF For $2B

By the end of this year, the real estate services industry will see a major consolidation.

JLL has agreed to acquire HFF for $2B, the companies said in a statement. The cash and stock transaction will close in the third quarter, subject to HFF shareholder approval and customary closing conditions, including regulatory review. Based on the amount of JLL stock received, former HFF shareholders will own roughly 13% of the new company.

HFF shareholders will receive $24.63 in cash and 0.15 shares of JLL for each share of HFF stock held at the time of acquisition for a total value of $49.16 per share. That amounts to a 5.7% premium over HFF's stock price as of the market's close on Monday, Reuters reports. The boards of both JLL and HFF agreed to the deal unanimously. JLL will fund the cash portion of the acquisition with a combination of its own reserves and its "existing syndicated credit facility," the statement read.

The acquisition will allow JLL to rapidly scale its capital markets division domestically, as well as its debt advisory services in Europe and Asia, the companies said in a release. The new company expects to save about $28M in operational costs during its first 12 months, The Real Deal reports.

At the time of the deal's announcement, JLL ranked behind only CBRE in terms of global investment volume handled, according to Real Capital Analytics. HFF ranked sixth. Though CBRE still handles more investment sales per year than JLL and HFF combined, the gap will close significantly. JLL will focus initially on using its added size to grow its client base, JLL Global CEO Christian Ulrich said in the announcement.

HFF CEO Mark Gibson will become JLL CEO of Capital Markets, Americas and co-chair of JLL’s Global Capital Markets Board, and HFF expects to place one of its directors on JLL's board once the transaction is complete. JLL has signed "key HFF senior leaders and capital markets advisers" to three- or four-year employment/retention/noncompete commitments.

JLL used J.P. Morgan as its financial adviser in the deal, and HFF enlisted Morgan Stanley in that role. Mergers and acquisitions have become increasingly common in the global real estate market, according to TRD, as brokerage and services firms fight for scale to avoid the fate of Eastern Consolidated, which closed its doors after failing to find a suitable buyer.