Icahn’s High River, Insignia May Merge
Financier Carl Icahn is considering merging one of his units with Insignia Financial Group Inc., the fourth-largest U.S. commercial real estate brokerage, Icahn said in a regulatory filing.
Icahn’s High River and Insignia “are considering whether to explore the possibility of a merger without a tender offer,” according to a Securities and Exchange Commission filing. High River and New York-based Insignia have signed a confidentiality agreement allowing them to exchange information.
The filing follows a Friday announcement by Insignia Financial that it is in talks to merge with Los Angeles-based CB Richard Ellis Inc., creating the world’s biggest commercial real estate brokerage. Both companies are contending with a decline in the pace of leasing activity as companies trim back, which has cut into revenue.
Icahn and affiliates of the billionaire bought a 6.9% stake in Insignia, which is the biggest property broker in New York and operates eight offices in Southern California, in December. Icahn bought 1.6 million common shares of Insignia for $12.1 million, including commissions, or an average cost of $7.57 a share, according to the December filing.
Insignia Chairman and Chief Executive Andrew Farkas may be preparing a backup plan in case CB Richard Ellis isn’t able to come up with the financing for a purchase. CB has been saddled with a high debt load since it was taken private in a leveraged buyout in 2001. The company’s debt is rated B1 by Moody’s Investors Service, or six levels below investment grade.
“I have trouble understanding how CB is going to pay for Insignia, given that they’re already a highly leveraged company,” said Will Marks, managing director at JMP Securities in San Francisco.
An Insignia spokesman, Steve Iaco, said the company had no comment on Icahn’s filing. Calls to Icahn, CB Richard Ellis spokesman Victor Dominguez and Murray Indick, a representative of CB Richard Ellis owner Blum Capital Partners, weren’t returned.
Insignia shares rose $1.27, to $10.99, in New York Stock Exchange trading. The shares are up 52% this year on merger talks.
