Colony Financial To Merge With Colony Capital - Quick Facts

(RTTNews) - Colony Financial, Inc. (CLNY) and the parent company of its manager, Colony Capital, LLC, announced that they have signed a definitive agreement for the contribution to CLNY of substantially all of Colony Capital's real estate and investment management businesses and operations for an aggregate potential consideration of up to $657.5 million, to be paid in a combination of shares of CLNY common stock and membership interests in a subsidiary of CLNY that will hold CLNY's business and operations, and otherwise on terms consistent with the non-binding agreement in principle jointly announced by the parties on November 4, 2014.

The aggregate potential consideration of $657.5 million consists of: fixed upfront consideration equal to approximately $547.5 million; contingent consideration of up to approximately $110 million, subject to multi-year performance targets for achievement of certain adjusted funds from operations per share targets and capital-raising thresholds from the funds management businesses. If the minimum performance target for either of these metrics is not met or exceeded, the contingent consideration paid in respect of the other metric would not be paid out in full.

Up to $15 million of the contingent consideration may be reallocated to upfront consideration if the volume-weighted average closing price of CLNY common stock over the 10 trading days prior to the 10th calendar day preceding the date of a shareholder vote in connection with the Proposed Transaction were to exceed $24.05, with the full $15 million reallocated if such volume-weighted average closing price of CLNY common stock were to exceed $27.05.

The Proposed Transaction was unanimously approved by a special committee comprised of independent and disinterested members of CLNY's board of directors.

The combined company will be led by Colony Capital's Executive Chairman, Thomas J. Barrack, Jr., and its Chief Executive Officer, Richard B. Saltzman, who have both entered into five-year employment agreements with CLNY to become effective at closing, and will continue to oversee and manage the day-to-day business operations of the group.

The Proposed Transaction is expected to close in the first half of 2015. Upon closing, CLNY will become a self-managed real estate investment trust and will be empowered to form and invest as general partner in new funds under the Colony name.