Exhibit 99.1
NEWS RELEASE
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Contact:
Security Capital Group:
Xxxxxxx X. (Xxxx) Xxxxxx
(000) 000-0000
SC-U.S. Realty:
Xxxxx Xxxxxxxx
x000 00 00 00 0000
U.S. callers dial 000 000 00 00 00 0000
SECURITY CAPITAL GROUP AND SC-U.S. REALTY REACH AGREEMENT
TO COMBINE COMPANIES
(September 26, 2000) - Security Capital Group Incorporated (NYSE: SCZ) and
SC-U.S. Realty (NYSE: RTY) (Amsterdam AEX Stock Exchange ISIN-Code:
LU0060100673) announced today that they have entered into a definitive agreement
to combine the two businesses. Under the terms of the agreement, shareholders of
SC-U.S. Realty will receive 1.15 shares of SCZ Class B common stock for each
share of outstanding RTY stock, and Security Capital will acquire the assets and
assume or provide the necessary funds to satisfy the liabilities of SC-U.S.
Realty. The number of shares of SCZ stock to be received in respect of each of
RTY stock represents an 8.5% premium over the relative average trading prices of
the two stocks for the past 30 days. The agreement was unanimously approved by
the Board of Directors of SC-U.S. Realty, based upon review, approval and
unanimous recommendation by a special committee of the SC-U.S. Realty Board
consisting of three of its independent directors, and unanimously approved by
the Board of Directors of Security Capital. The total value of the transaction
is approximately $1.4 billion, excluding the value of the SC-U.S. Realty shares
owned by Security Capital.
Additionally, Security Capital's Board increased its previously announced $100
million stock buyback program to a total of $450 million, with the increase to
be implemented after closing of the transaction. The authorized increase
includes up to $200 million that will be available to dissenting SC-U.S. Realty
shareholders that elect to receive cash in lieu of SCZ stock in the transaction.
Security Capital will not be obligated to proceed with the transaction should
shareholder elections require cash payments in excess of $200 million. In light
of Luxembourg legal requirements, the transaction will be structured in two
steps. Security Capital will exchange its stock and cash for assets of SC-U.S.
Realty, followed by the repayment of SC-U.S. Realty's line of credit and
satisfaction and discharge of its convertible debentures. Shortly after the
exchange, SC-U.S. Realty shareholders will receive a distribution of SCZ stock
or cash.
The two companies believe that the transaction should provide important benefits
for both groups of shareholders. The transaction would eliminate the complex
structural relationship that exists between the two companies and remove a tier
of discount and unrealized value currently reflected in the stock prices of
each. Further, the combined company is expected to have
increased financial and operational flexibility and provide shareholders with
enhanced liquidity. The transaction is also expected to enhance opportunities to
improve shareholder value through substantial additional stock repurchases or
future transactions that monetize or consolidate existing businesses.
As a consequence of the transaction, Security Capital is expected to receive
increased annual dividends and interest of $154.5 million after the cancellation
of the management agreement with SC-U.S. Realty. In addition, approximately $8
million of operating expenses will be permanently eliminated. On a pro forma
basis as of June 30, 2000, Security Capital's reported net asset value increases
by 12.7% and cash flow from operations for the trailing four quarters increases
by 22.4% to $1.04 per share. Total pro forma cash flow from operations for the
same period increases 67.2% to $155.5 million. After the transaction, the pro
forma fixed charge coverage ratio per Security Capital's line of credit is
2.68x, with a leverage ratio of 29.1%. This pro forma financial information is
based on only the $200 million cash election amount provided for in the
transaction agreement, and does not take into account the additional $250
million of SCZ share repurchases authorized by Security Capital's Board or the
anticipated expense savings. Please refer to page 3 of the supplemental
information for details on the pro forma effect of this transaction on EBDADT
(earnings before depreciation, amortization and deferred taxes).
Xxxxxxx X. Xxxxxxx, Chairman of both Security Capital Group and SC-U.S. Realty,
said, "This is a unique and equitable opportunity to create substantial value
for both groups of shareholders. This move will allow Security Capital to
accelerate simplification of its structure and reduce the significant public
market discount that exists in the stock prices of both companies today." Xx.
Xxxxxxx said that this is a major step in the transition of the combined entity
to an operating company model. "In addition to receiving a premium to the
current RTY share price, SC-U.S. Realty shareholders will be owners, along with
current Security Capital shareholders, of a company with strong free cash flow
and solid earnings growth prospects from a diversified group of assets," he
said.
"The strength of the combined balance sheet should provide the resulting company
with significant financial flexibility and a self-funding capability that will
enable future value-creating transactions, including significant stock
repurchases," said C. Xxxxxx Xxxxxxxxxxx, Vice Chairman and Chief Operating
Officer of Security Capital. He noted that the transaction enables SC-U.S.
Realty shareholders to benefit from the elimination of investment limitations
imposed on its investees by various tax rules applicable to SC-U.S. Realty.
"Finally, shareholders will benefit from the removal of a tier of operating
expenses currently incurred at SC-U.S. Realty and at Security Capital in its
advisory capacity."
The transaction is subject to approval by the holders of two-thirds of SC-U.S.
Realty shares, and the holders of a majority of the voting power of Security
Capital shares, who cast votes at special shareholder meetings of each company,
expected to take place early in the first quarter of 2001. Security Capital owns
30,401,683, or 40.6%, of outstanding SC-U.S. Realty shares and will vote its
shares in favor of the transaction. The transaction is subject to review under
United States anti-trust rules, as well as by the Commission de Surveillance du
Secteur Financier, the
Luxembourg regulatory agency that has authority over SC-U.S. Realty, and is
subject to other customary conditions to closing, including receipt of the
necessary financing. Subject to these matters, the transaction is expected to
close promptly after shareholder approvals.
SC-U.S. Realty shareholders, if any, who vote against the transaction will have
the option to receive SCZ common stock or up to $200 million in cash, in a
per-share amount equal to the average high and low trading price of the SCZ
common stock for a 15 trading-day period that ends on the sixth trading day
prior to the SC-U.S. Realty shareholder meeting, multiplied by 1.15. If cash
elections amount to less than $200 million, the balance will be used by Security
Capital to repurchase its own stock. U.S. shareholders of SC-U.S. Realty who
receive SCZ stock or cash in the transaction will recognize gain or loss for
U.S. tax purposes; tax treatment of non-U.S. shareholders will depend on the
laws in their country of residence.
As part of the transaction, SC-U.S. Realty will use cash received from Security
Capital to satisfy and discharge its obligations in respect of its outstanding
2% senior unsecured convertible debentures due 2003. Debenture holders are
expected to receive cash equal to the full accreted value of the debentures in
May 2001. Also in connection with the transaction, SC-U.S. Realty's outstanding
bank debt will be refinanced by Security Capital. Security Capital has arranged
a $625 million acquisition facility to finance the transaction.
Xxxxxxx, Sachs & Co. advised Security Capital and Xxxxxxx Xxxxx & Co. Inc.
advised the SC-U.S. Realty Special Committee in the transaction. The acquisition
facility was arranged by Chase Securities, Inc. and Xxxxx Fargo Bank N.A.
Security Capital Group Incorporated is an international real estate research,
investment and operating management company. Security Capital operates its
business through two divisions. The Capital Division provides operational and
capital deployment oversight to direct and indirect investments in real estate
operating companies, generating earnings principally from its ownership of these
affiliates. Currently, the Capital Division has investments in 16 real estate
operating companies. The Financial Services Division generates fees principally
from capital management and capital markets activities. The principal offices of
Security Capital and its directly owned affiliates are in Amsterdam, Atlanta,
Brussels, Chicago, Denver, El Paso, Houston, London, Luxembourg, New York and
Santa Fe.
SC-U.S. Realty is a research-driven real estate company focused on taking
significant strategic investment positions in value-added real estate operating
companies based in the United States. SC-U.S. Realty's strategic investments
included ownership positions and commitments to six U.S. real estate investment
trusts (REITs).
SUPPLEMENTAL FINANCIAL INFORMATION ON THE PROPOSED TRANSACTION MAY BE FOUND ON
THE COMPANIES' RESPECTIVE WEB SITES AT XXX.XXXXXXXXXXXXXXX.XXX OR
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XXX.XX-XXXXXXXX.XXX.
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The senior management of Security Capital and SC-U.S. Realty will host a
conference call to discuss the transaction on Tuesday, September 26, 2000, at 10
a.m. EDT. A live webcast of the
call and the accompanying presentation will be available simultaneously through
a link at Security Capital's web site at xxx.xxxxxxxxxxxxxxx.xxx.
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The phone number for the conference call is 0-000-000-0000 for domestic U.S.
callers, and 0-000-000-0000 for international participants. A taped replay of
the conference call and a copy of the presentation will be available by logging
on to xxx.xxxxxxxxxxxxxxx.xxx or by calling 1-800-475-6701 in the United States
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or 1-320-365-3844 outside the United States and entering the access code 540387.
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THIS PRESS RELEASE AND THE ATTACHED SUPPLEMENTAL INFORMATION CONTAIN CERTAIN
STATEMENTS THAT ARE NEITHER REPORTED FINANCIAL RESULTS NOR OTHER HISTORICAL
INFORMATION. THESE STATEMENTS ARE FORWARD-LOOKING STATEMENTS WITHIN THE MEANING
OF THE SAFE-HARBOR PROVISIONS OF THE U.S. FEDERAL SECURITIES LAWS. THESE
STATEMENTS REFLECT THE CURRENT VIEWS OF SECURITY CAPITAL AND/OR SC-U.S. REALTY
WITH RESPECT TO FUTURE EVENTS AND ARE NOT GUARANTEES OF FUTURE PERFORMANCE.
BECAUSE THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO RISKS AND UNCERTAINTIES,
ACTUAL FUTURE RESULTS MAY DIFFER MATERIALLY FROM THOSE EXPRESSED IN OR IMPLIED
BY THE STATEMENTS. MANY OF THESE RISKS AND UNCERTAINTIES RELATE TO FACTORS THAT
ARE BEYOND THE COMPANIES' ABILITY TO CONTROL OR ESTIMATE PRECISELY, SUCH AS
FUTURE MARKET CONDITIONS, THE BEHAVIOR OF OTHER MARKET PARTICIPANTS, THE ACTIONS
OF GOVERNMENTAL REGULATORS AND OTHER RISK FACTORS DETAILED IN SECURITY CAPITAL'S
AND SC-U.S. REALTY'S REPORTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
YOU ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING
STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE OF THESE MATERIALS. THE COMPANIES DO
NOT UNDERTAKE ANY OBLIGATION TO PUBLICLY RELEASE ANY REVISIONS TO THESE
FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE OF
THESE MATERIALS.
WE URGE YOU TO READ THE JOINT PROXY STATEMENT/PROSPECTUS REGARDING THE PROPOSED
TRANSACTION BETWEEN SECURITY CAPITAL GROUP INCORPORATED AND SECURITY CAPITAL
U.S. REALTY, WHEN IT BECOMES AVAILABLE, BECAUSE IT WILL CONTAIN IMPORTANT
INFORMATION. THE JOINT PROXY STATEMENT/PROSPECTUS WILL BE FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION BY SECURITY CAPITAL GROUP. YOU MAY OBTAIN A
FREE COPY OF THE JOINT PROXY STATEMENT/PROSPECTUS (WHEN IT IS AVAILABLE) AND
OTHER DOCUMENTS FILED BY SECURITY CAPITAL GROUP AND SC-U.S. REALTY WITH THE
COMMISSION (INCLUDING THE DOCUMENTS INCORPORATED BY REFERENCE INTO THE JOINT
PROXY STATEMENT/PROSPECTUS) AT THE COMMISSION'S WEB SITE AT XXX.XXX.XXX.
SHAREHOLDERS OF SECURITY CAPITAL GROUP MAY ALSO OBTAIN A FREE COPY OF THE JOINT
PROXY STATEMENT / PROSPECTUS (WHEN IT IS AVAILABLE) AND THESE OTHER DOCUMENTS BY
DIRECTING A REQUEST TO SECURITY CAPITAL GROUP INCORPORATED, ATTENTION: XXXXXXX
X. XXXXXX, TELEPHONE: 000 000-0000. SHAREHOLDERS OF SC-U.S. REALTY MAY ALSO
OBTAIN A FREE COPY OF THE JOINT PROXY STATEMENT/PROSPECTUS (WHEN IT IS
AVAILABLE) AND THESE OTHER DOCUMENTS BY DIRECTING A REQUEST TO SECURITY CAPITAL
U.S. REALTY, ATTENTION: XXXXX XXXXXXXX, TELEPHONE: x000 00 00 00 0000 (U.S.
CALLERS DIAL 000 000 00 00 00 0000).
SECURITY CAPITAL GROUP AND CERTAIN OTHER PERSONS MAY BE DEEMED TO BE
PARTICIPANTS IN THE SOLICITATION OF PROXIES FROM SECURITY CAPITAL GROUP'S
STOCKHOLDERS TO APPROVE THE ISSUANCE OF SECURITY CAPITAL GROUP STOCK IN
CONNECTION WITH THE PROPOSED TRANSACTION. THE PARTICIPANTS IN THIS SOLICITATION
MAY INCLUDE THE DIRECTORS AND EXECUTIVE OFFICERS OF SECURITY CAPITAL GROUP.
INFORMATION REGARDING SECURITY CAPITAL GROUP'S DIRECTORS AND EXECUTIVE OFFICERS
AND THEIR SECURITY HOLDINGS IN SECURITY CAPITAL GROUP IS CONTAINED IN SECURITY
CAPITAL GROUP'S PROXY STATEMENT FOR ITS ANNUAL MEETING OF SHAREHOLDERS DATED
APRIL 10, 2000.
