Real Estate Merger to Create Largest Net Lease REIT, Boost Dividends

Banking, finance, and taxes

Published: October 23, 2013 11:05 am

Wednesday morning brought the announcement of a merger between American Realty Capital Properties Inc. (NASDAQ: ARCP) and Cole Real Estate Investments Inc. (NYSE: COLE). That will create a single company with an enterprise value of $21.5 billion, and it will create the largest net lease real estate investment trust (REIT) in the country. Cole shareholders can choose to accept either a cash offer of $13.82 per share of Cole stock or 1.0929 shares of American Realty stock, worth about $14.59 as of Tuesday night’s closing price.

American Realty valued the deal at $11.2 billion, which roughly equals the cash or stock offer plus Cole’s debt. American Realty also said it has secured $2.75 billion in financing from Barclays and expects the deal to close in the first half of next year.

Cole, made up of several entities, refused a buyout offer from American Realty earlier this year, choosing instead to go ahead with an initial public offering in June.

Upon closing, American Realty will increase its dividend from $0.72 a share to $1.00 a share. Cole currently pays a dividend of $0.91 per share.

The combined company will be 64% larger than the closest comparable net lease REIT. The merged company’s portfolio will include 3,732 properties leased to more than 600 tenants occupying more than 100 million square feet of space in 49 states and Puerto Rico.

Shares of Cole were up about 8.2% Wednesday, at $13.89 in a 52-week range of $9.85 to $14.68. That high was set earlier in the morning.

American Realty shares were down about 1.3%, at $13.18 in a 52-week range of $11.64 to $18.05.

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