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American Realty Capital, Cole Real Estate Investments To Merge In $11.2 Bln Deal

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10/23/2013 6:41 AM ET

American Realty Capital Properties Inc. (ARCP: Quote) and Cole Real Estate Investments Inc. (COLE: Quote) announced Wednesday that they have signed a definitive agreement to merge the two companies. The transaction is valued at $11.2 billion and will create the largest net lease REIT with an enterprise value of $21.5 billion.

The Merger Agreement has been unanimously approved by the board of directors of each company. It is subject to customary closing conditions, including stockholder votes by both companies.

ARCP said it has secured $2.75 billion of fully committed financing from Barclays in connection with the transaction, which is expected to close in the first half of 2014.

As per the terms of the Merger Agreement, Cole will merge with and into a wholly owned subsidiary of ARCP. Cole stockholders may elect to receive 1.0929 shares of ARCP common stock (reflecting a fixed exchange ratio) or $13.82 cash for each share of Cole common stock. In the event elections for payment in cash exceed 20% of Cole's outstanding shares, such elections would be prorated. ARCP's offer is valued at $14.59 per Cole common share based on the fixed exchange ratio of 1.0929 and ARCP's closing price of $13.35 on October 22, 2013.

The offer price represents a premium of 13.8% based on Cole's closing price on October 22, 2013 of $12.82. Shares of ARCP common stock issued to Cole stockholders are expected to be registered, fully tradable, listed on the NASDAQ and not subject to any "lockup." ARCP will increase its annualized dividend $0.06 to $1.00 per share upon the close of the merger.

ARCP has updated 2014 AFFO guidance, which is expected to range from $1.13 to $1.19 per share, an increase of approximately 25% over the previously issued 2013 AFFO per share guidance of $0.91 to $0.95. Analysts polled by Thomson Reuters expect the company to report earnings of $1.12 per share for fiscal 2014. Analysts' estimates typically exclude special items.

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by RTT Staff Writer

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