Private equity buyout firm Blackstone Group agreed on Monday to buy U.S. office building owner Equity Office Properties Trust (EOP) in a deal valued at nearly $19 billion excluding debt.

Equity Office, founded by real estate mogul Sam Zell in 1976, has been the subject of buyout rumors for about 6 months, as private funds, including Blackstone have been snapping up publicly traded real estate investment trusts at a quickening clip.

The offer by Blackstone affiliate Blackstone Real Estate Partners of $48.50 per share in cash — an 8.5 percent premium to the stock's last closing price — values the equity of the company at nearly $19 billion, based on share data from the company's latest regulatory filing.

When including debt, the deal is valued at $36 billion, which tops the previous biggest leveraged buyout under this measure — the $33 billion buyout of hospital operator HCA Inc. (HCA) earlier this year. Excluding debt, the HCA deal was worth $21 billion.

Shares of Equity Office closed on Friday at $44.72 on the New York Stock Exchange. In June 2005, Zell told Reuters that Equity Office shares were undervalued, and the company was trading at only 80 percent of its net asset value — a measure of the property firm's portfolio value.

Equity Office said its board of trustees had approved the deal, which is expected to be completed in the first quarter of 2007. It said neither its management nor its trustees were part of the buying group.

"We believe that the skills and strengths of Equity Office will greatly enhance our existing office platform, which has been expanded through our recent acquisitions of CarrAmerica and Trizec," Jonathan Gray, senior managing director of The Blackstone Group, said in a news release.

Equity Office and Blackstone were not immediately available for comment.

DEAL SIZE RISES

Multi-billion dollar leveraged buyouts (LBOs) have become the norm recently as high liquidity in the global financial system has sent cash rushing into the private equity sector.

Private equity firms typically buy companies with a small portion of their own cash and borrow the rest. They tend to hold a business for three to five years, restructure it, then sell it, either to a buyer or on the open market in an initial public offering.

Blackstone has raised a total of more than $67 billion for alternative asset investing of which almost $13 billion has been for real estate investing.

The firm has a long track record of investing in office buildings, hotels and other commercial properties.

It recently acquiring office real estate investment trust (REIT) Trizec Properties Inc. for $4.8 billion, plus the assumption of $4.1 billion of Trizec's debt. In July, Blackstone bought office property owner CarrAmerica Realty Corp. for a total of $5.6 billion.

Equity Office Properties Trust is the largest publicly held office building owner and manager in the United States with interests in 580 buildings comprising 108.6 million square feet in 16 states and the District of Columbia.

Merrill Lynch & Co. (MER) advised Equity Office. Goldman, Sachs & Co. (GS), Bank of America (BAC) , Bear Stearns (BSC), Blackstone Corporate Advisory and Morgan Stanley (MS) acted as financial advisors to Blackstone.

Acquisition financing will be led by Goldman, Bank of America, and Bear Stearns.