JLL - Raymond James explores hypothetical Cushman & Wakefield-Jones Lang LaSalle deal

Raymond James explored a hypothetical buyout of commercial real estate firm Cushman & Wakefield ( NYSE: CWK ) by Jones Lang LaSalle ( JLL ), saying the combination would offer "meaningful strategic benefits".

In a note to clients, analyst Patrick O'Shaughnessy said a theoretical combination of the second-largest ( JLL ) and third-largest ( CWK ) firms by revenue in the industry "would create a competitor approaching the size of CBRE ( CBRE )". A potential merger would result in improvement of the scale and reach of the companies' combined platform.

"We believe JLL could see 20%+ EPS accretion from acquiring CWK while still paying a healthy premium and maintaining acceptable balance sheet leverage," said O'Shaughnessy.

In its initial merger model, Raymond James assumed Jones Lang ( JLL ) would pay a 50% premium to Cushman's ( CWK ) closing price on Dec. 19 of $11.08, implying a total enterprise value of ~$7B.

The combination would have greater expense synergies, the research firm noted, due to greater business overlap as well as potential for redundancy elimination.

The model also assumes 10% of Cushman's ( CWK ) 2023 transaction revenues are lost equating to ~$330M in revenue dis-synergies.

"This exercise is purely hypothetical as neither company indicated specific interest in a potential tie-up, although both firms are generally open to the idea of consolidating M&A," said O'Shaughnessy.

Shares of Jones Lang ( JLL ) ticked 1.3% higher, while Cushman ( CWK ) rose 2.7% in late Tuesday trading.

Compare key stats of JLL, CWK, and CBRE here .

See why SA contributor WideAlpha considers Jones Lang LaSalle ( JLL ) shares to be "significantly undervalued."

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