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American Realty Capital to buy CapLease for $2.2 billion

Tue May 28, 2013 1:01pm EDT

(Reuters) - American Realty Capital Properties Inc (ARCP.O) will buy CapLease Inc (LSE.N) for about $2.2 billion, including debt, saying the deal would make it the third largest U.S. real estate investment trust in the net-lease sector where tenants pay most of the operating costs.

The CapLease deal follows ARCP's failed efforts to buy Cole Credit Property Trust III for $6.7 billion, which would have made it the largest publicly traded REIT in the net-lease sector.

Net-leased properties have become very popular among investors in the current low-interest environment.

ARCP said it would pay $8.50 per share in cash, representing a premium of about 20 percent to CapLease's Friday closing.

CapLease shares were up 21 percent at $8.60 on the New York Stock Exchange, slightly above the offer price. American Realty shares were up about 5 percent at $17.34 on the Nasdaq.

Based on the number of shares outstanding on Friday, the equity value of the deal is about $755 million.

CapLease preferred shareholders will have the right to receive $25 per share in cash plus an amount equal to any accrued and unpaid dividends, ARCP said. (r.reuters.com/wuq48t)

ARCP said it would assume about $580 million of CapLease's $1.2 billion of debt and intends to repay the balance.

"While there could be some competing bids, perhaps from other public net-lease players, we think the short lease duration (roughly 6 years, the shortest of any triple-net REIT) could potentially scare away other bidders," Stifel, Nicolaus & Co analyst Joshua Barber said in a note to clients.

ARCP said it expected the deal to generate about 11 cents per share in additional adjusted funds from operations annually, and, upon closing, will allow it to increase dividends by 3 cents per share to an annualized rate of 94 cents per share.

(Reporting by Bijoy Koyitty in Bangalore; Editing by Don Sebastian)

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