American Realty Capital Properties Inc ARCP.O (ARCP) said it would buy American Realty Capital Trust IV (ARCT) for $3.1 billion as it seeks to become the second-largest operator in the fast-growing U.S. net-lease property sector.
ARCT, a real estate investment trust sponsored by the same group that manages ARCP, owns properties net-leased to single tenants such as fast-food restaurants and convenience stores.
The net-lease industry has attracted investors as tenants pick up most of the operating costs and the properties are leased for long periods, performing like a high-dividend bond.
Cole Credit Property Trust II merged with Spirit Realty Capital Inc (SRC.N) in January. That deal also involved a public company providing shareholders of a non-public REIT with the ability to sell their shares.
ARCP has also sought a bigger share of the net-lease market, which is led by Realty Income Corp (O.N). It bid twice for Cole Credit Property Trust III Inc to become No.1 in the industry but withdrew after being rejected.
The company then reached a deal to buy CapLease Inc LSE.N for $2.2 billion in May and bought more than 400 net-lease properties from General Electric Co's (GE.N) financial arm in June.
ARCP said on Tuesday it would have an enterprise value of $10 billion once all these deals were completed. It will also own 2,579 single tenant properties across 48 U.S. states.
ARCP has been among the best performing REITs on a 12-month trailing basis with a shareholder return of 58 percent, Chief Executive Nicholas Schorsch said in a statement.
According to the terms of the deal, each ARCT shareholder will either receive $30 in cash or 2.05 shares of ARCP's common stock, valuing the offer at $30.34 per share based on ARCP's Monday close of $14.80.
The acquisition is expected to close by the third quarter ending September, ARCP said.
The company also raised its annualized dividend to 94 cents per share from 91 cents.
ARCP's shares were down 0.5 percent at $14.73 in morning trading on the Nasdaq. The Dow Jones Equity All-REIT .REI index was up 1 percent.
(Reporting by Sagarika Jaisinghani in Bangalore; Editing by Saumyadeb Chakrabarty and Maju Samuel)