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CB Richard Ellis buys Insignia.

CB Richard Ellis Inc. agreed to buy the Insignia Financial Group for about $256 million in cash, consolidating its position as the largest commercial real estate broker in the world and greatly expanding its position in New York.

CB Richard Ellis, which is based in Los Angeles, said the combined company would be the world's largest manager of commercial property and would generate $90 billion in annual sales and leasing transaction. CB Richard Ellis agreed to pay $11. for each share of Insignia common stock. It also agreed to spend about $155 million to pay off Insignia's debt and acquire its preferred stock, bringing the total value of the deal to about $415 million. Blum Capital Partners, which took CB Richard Ellis private in an $800 million buyout in July 2001, will provide the company with up to $145 million in cash to help finance the deal.

There is no question that CB Richard Ellis will fulfill its longstanding quest to become a big player in New York. A year ago, the company hired Mary Ann Tighe, a top broker at Insignia, to run its New York operation and gave her a $100 million budget. She is CBRE's President and CEO of the New York Tri-State region. Stephen B. Siegel, chairman of Insignia's commercial real estate services in the United States, will become chairman of global brokerage for CB Richard Ellis.

"It won't have that much impact in the New York market because CBRE didn't have much of a presence here; notwithstanding Mary Ann Tighe," said James Kuhn president of Newmark and Co. "It will have an impact outside New York; where both CBRE and Insignia have a fairly large presence. I also believe that if Insignia is worth $415 million, then Steve Siegel is worth half of that. If CB thinks they can run the company without him having a major leadership role, they are kidding themselves. The deal itself didn't surprise me. What did surprise me was that Steve isn't running the company. He is a one of-a-kind guy and CBRE is going to run this firm without Steve heading it up, they should have their heads examined."

The two companies will have annual revenue of more than $1.8 billion and 16,000 employees in 47 countries. Insignia plans to sell certain unspecified real estate assets before the deal closes. If it receives more than $45 million, shareholders will receive up to an additional $1 a share.

"Both CB and Insignia are powerhouses in their own right, and the merged companies will be quite a force in the brokerage industry," said Robert M. White, Jr., president of Real Capital Analytics. "Consolidation has been a recent trend for commercial real estate owners and service providers. The industry is moving closer to a national and even international marketplace from one that historically has been fragmented and localized. CB/Insignia is well positioned to capitalize on this trend."

Previously, Insignia disclosed that it had entered merger talks with CBRE Holdings, the parent company of rival CB Richard Ellis, regarding a proposed combination of the two firms. In New York, a merger would also reunite super broker Mary Ann Tighe with her former colleagues at Insignia/ESG. CB Richard Ellis made headlines last year after luring Tighe away from Insignia to head its New York Tri-State region.

CB Richard Ellis has just under 10,000 employees and maintains 250 offices in 47 countries. After a brief stint as a publicly-traded entity, the firm was taken private in July 2001 in an $800 million leveraged-buyout led by Blum Capital Partners.

Insignia Financial has about 6,500 employees in 100 offices worldwide. In addition to its U.K.-based Insignia Richard Ellis, the firm owns Paris-based Insignia Bourdais with operations throughout France, and Insignia Brooke, Insignia's Asian operations, launched with the acquisition of Brooke International in December 2000. Insignia also owns Insignia Douglas Elliman - the largest residential brokerage firm in New York City, and Insignia Residential Group, a manager of cooperative and condominium apartments in the New York metropolitan area.
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Title Annotation:Insignia Financial Group
Author:Viuker, Steve
Publication:Real Estate Weekly
Geographic Code:1U2NY
Date:Feb 26, 2003
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