* American Realty offers $5.7 bln in cash and stock
* American Realty asks Cole Credit to call off merger with
By Ilaina Jonas and Tanya Agrawal
March 20 Real estate investment trust American
Realty Capital Properties Inc on Wednesday said it
offered to buy unlisted Cole Credit Property Trust III Inc for
$5.7 billion in cash and stock, sending American Realty's stock
up more than 5 percent.
American Realty Capital Property's offer comes about two
weeks after Cole Credit Properties Trust III said it would buy
its external adviser, Cole Holdings Corp, and pursue a path to
become listed on the New York Stock Exchange.
The deal would make American Realty 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. Because the
tenants pick up most of the operating costs associated with the
properties and the properties are leased for long periods, they
resemble a bond but with a higher dividend.
The sector has been consolidating. Cole Credit Property
Trust II merged with Spirit Realty Capital Inc.. That
deal also involved a public company providing shareholders of a
non-public REIT with the ability to sell their shares.
Nicholas Schorsch, American Realty's chairman and chief
executive, said his company's offer is superior to that
involving Cole Holdings. He noted that Cole Credit Properties'
shareholders would not be required to pay to Cole Holdings $120
million in fees and that American Realty it has a track record
as a public company. It is listed on the Nasdaq.
"Our bid is fully banked," Schorsch said. "It's fully
financed. We have the stock available. It's approved by our
board. It's subject really only to a merger agreement and
shareholder approval. It creates a real powerhouse in the REIT
A representative from Cole Credit Property said the
independent members of the board were considering the offer
Should Cole Credit Property Trust III accept American Realty
Capital's offer, the deal could be completed in six to eight
weeks, Schorsch said.
American Realty Capital said it had earlier expressed
interest in the company but was surprised not to have received
"They're looking for a liquidity event, and we're looking
for an acquisition," Schorsch said. "We've reached out to their
advisers. We're hopeful for a positive response. In our minds,
at this point there's no real adversarial position here."
American Realty Capital urged Cole Credit Property Trust III
to call off its plans to acquire its outside manager.
Cole Credit Property Trust III owns 926 properties with a
combined area of nearly 40 million square feet in 47 states and
counts Walgreen Co and CVS Caremark Corp among
American Realty Capital has 1,706 properties, or about 60
million square feet. Its top 10 tenants include Dollar General,
Citizens Bank, FedEx Corp and Walgreen.
American Realty Capital is offering at least $12 in cash or
0.80 share of its own stock for each Cole Credit share. American
Realty Capital's annual dividend will increase by 2 cents per
share to 93 percent upon closing, under the terms of the deal.
Cole Credit Property stockholders who elect to be paid in shares
will receive a prorated 74.4 cents per share, compared with
Cole's current dividend of 65 cents per share, American Realty
The combination would result in a savings of $30 million
annually and reduce the concentration of the top 10 tenants to
less than 33 percent from 62 percent.
Cole Holdings will be paid $111 million as a subordinated
management incentive fee following the terms of Cole Properties'
existing advisory agreement.
American Realty's Capital's offer is valued at more than $9
billion including debt, the company said in its statement on
American Realty Capital is being advised by its affiliated
Realty Capital Securities and Barclays. It was unclear who was
advising Cole Credit Property Trust.
Shares of American Realty Capital Trust closed up 73 cents,
or 5.2 percent, at $14.66.