Parkway Properties Inc (PKY.N) said it will buy Thomas Properties Group Inc TPGI.N for about $300 million in stock and the assumption of about $750 million of debt, primarily to expand in Texas.
The deal will add seven properties in Houston and Austin to Parkway's portfolio, which owns office properties across the U.S. Sunbelt.
"This transaction will significantly expand and upgrade our presence in Houston and simultaneously will allow us to fulfill our stated strategy of expanding into the Austin market," Parkway Chief Executive James R. Heistand said.
Upon completion of the deal, Parkway will sell two of Thomas' office properties in Philadelphia to Brandywine Realty Trust (BDN.N) for $332 million, to pay down the assumed debt to $530 million. It also struck a $51 million deal with Brandywine for an Austin property.
Following the acquisition, Parkway's total portfolio square footage will be increased by about 40 percent from about 13.3 million square feet of leasable space it currently manages.
The deal, which is expected to close by the end of the fourth quarter, is expected to add to Parkway's funds from operations from 2014 onwards.
Parkway will pay Thomas Properties' shareholders 0.3822 shares for each share, valuing the deal at $6.26 per share, a premium of 10 percent to its closing on Wednesday.
BofA Merrill Lynch advised Parkway, while Morgan Stanley advised Thomas Properties.
Parkway shares closed at $16.37 on the New York Stock Exchange on Wednesday while Thomas Properties' shares closed at $5.70.
(Reporting by Mridhula Raghavan in Bangalore; Editing by Saumyadeb Chakrabarty)