Are Inland Real Estate Shareholders Getting Enough in the Merger?

Banking, finance, and taxes

Published: December 15, 2015 2:05 pm

Last Updated: January 13, 2020 4:03 pm

Inland Real Estate Corp. (NYSE: IRC) saw a handy gain in Tuesday’s session on news of a merger. The company announced that it entered into a definitive agreement to be acquired by real estate funds managed by DRA Advisors. The transaction is roughly valued at $2.3 billion, including the assumption of existing debt. However, it is still subject to regulatory and shareholder approval.

But are the shareholders getting enough? Under the terms of the merger, DRA will acquire Inland Real Estate for $10.60 per share in cash. When the merger is complete, Inland Real Estate will become a privately held real estate investment trust.

Ultimately, the board of directors of Inland Real Estate unanimously believes that this all-cash offer is the best course of action for the company in terms of addressing the “long-term discount” that its shares have traded at. The company is looking to close this valuation gap and provide its shareholders with a strong relative value for the investment.

The cash merger consideration of $10.60 per share represents a 6.6% premium over Monday’s closing price. It also represents a 17% premium to the 50-day moving average ($9.06) and 13% to the 200-day moving average ($9.36).

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Inland Real Estate has been trading in the range of $7 to $11 for about six years now. The stock was valued over $20 at one point, but it completely fell off the table in 2008 and into 2009.

Based on the stock’s performance over the past few years, it makes sense for DRA to value Inland Real Estate at this level. Shareholders might not be happy with the premium, but this may be their chance to get out.

Shares of Inland Real Estate were trading up nearly 7% at $10.62 on Tuesday afternoon, with a consensus analyst price target of $10.33 and a 52-week trading range of $7.96 to $11.73.

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