Parkway (PKY) Receives Shareholders' Approval For Merger

Houston, TX-based office REIT Parkway, Inc. (NYSE:PKY) announced that its merger with an affiliate of Canada Pension Plan Investment Board (CPPIB) has been considered and approved by the company’s stockholders.

In a special meeting, 85.58% of outstanding common shares and shares of limited voting stock voted in favor of the proposed merger. This class of common and voting stock consisted 99.68% of the total votes cast at the meeting.

On Jun 30, Parkway announced that it has struck a definitive agreement to be acquired by CPPIB for $1.2 billion.

Per the agreement, Parkway’s shareholders will receive $23.05 per share, comprising $19.05 per share merger consideration and a $4 special dividend. The share price consideration denotes a premium of around 14.3%, when compared to Parkway's 30-day volume weighted average price ended Jun 29, 2017. (Read more: Parkway to be Acquired by Canada Pension Plan for $1.2B)

The company also announced a special cash dividend of $4 per share of common stock. The dividend will be paid to shareholders of record as of Oct 9, 2017. However, the payment is subject to the satisfaction or waiver of all the conditions to the closing of the merger.

The deal, which is conditioned upon customary closing norms, is expected to close on or around Oct 12, 2017.

Notably, Parkway enjoys ownership of the largest office portfolio in Houston. Positioned in favorable areas of Greenway, Galleria and Westchase submarkets of Houston, this portfolio consists of five Class A assets, comprising 19 buildings, and aggregates around 8.7 rentable square feet of space. This portfolio was 87.6% leased as of Mar 31, 2017, and its tenants came from a broad mix of industries, including financial services, technology and commodities businesses.

However, the company has been facing a challenging time amid the lackluster energy market which has crippled the Houston office market. Nonetheless, the U.S. office vacancy rate remained steady at 13% in the second quarter amid balanced demand-supply, according to a CBRE Group (NYSE:CBG) report. In around half of the U.S. office markets, vacancy recorded a decline and the national office vacancy rate is hovering close to its post-recession low.

Additionally, corporate profits are up and business confidence has recovered. Going forward, with economic improvement and recovery in the job market, demand for office space is expected to shoot up. This will drive growth for office real estate investment trusts like Piedmont Office Realty Trust (NYSE:PDM) , Cousin Properties Incorporated (NYSE:CUZ) and Boston Properties, Inc. (NYSE:BXP) .

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