American Realty Capital Properties (ARCP) has completed its purchase of Cole Real Estate Investments, positioning ARCP as the largest publicly traded net lease real estate investment trust (REIT).
Under the terms of the merger agreement, ARCP issued to Cole stockholders 1.0929 shares of ARCP common stock for each Cole share to Cole stockholders who validly elected to receive stock consideration or to those who did not make a valid election, representing 98 per cent of all outstanding Cole shares.
The cash election, which was paid to Cole stockholders who made a valid cash election (which represented approximately two per cent of outstanding Cole shares), totalled approximately USD147m paid at USD13.82 per share, excluding certain payments to Cole executives who elected cash.
As previously announced, Cole stockholders who received stock consideration became eligible for ARCP's February 2014 dividend as record holders on 7 February 2014 record date. Such dividend will be paid out at an annualised rate of USD1.00 per share, or a February 2014 payment of USD0.08333 per share. The annualised dividend of USD1.00 per share reflects a USD0.06 per share increase effective upon the closing of the transaction.
The merger closed one day after ARCP's completion of a USD2.55bn unsecured note offering. The notes offering closed on 6 February and was comprised of three tranches: three-year; five-year; and 10-year notes. The bond offering was launched in connection with ARCP's receipt of a corporate investment grade credit rating from Standard & Poor's Rating Services of "BBB-" and the reaffirmation of its corporate investment grade credit rating from Moody's Investors Service of Baa3. Both S&P and Moody's issued the same respective investment grade credit ratings on the senior unsecured notes offered in the USD2.55bn offering, one of the largest unsecured bond deals in REIT history.
Nicholas S Schorsch, chairman and CEO of ARCP, says: "We were able to accelerate completion of this acquisition because both companies' teams worked tirelessly and collaboratively to get this deal done. The combined team that was so effective in bringing early closure to this transaction will now become a single, integrated team post-closing. This team is both highly skilled and highly knowledgeable in the net lease and private capital management (PCM) spaces. With the closing of the Cole acquisition, we have become one of the leading publicly traded REITs, and the dominant net lease REIT, 61 per cent larger than the closest net lease competitor. With the scale and advantages that come with being a USD21.5bn investment grade credit rated company, we expect to enjoy a significant cost of capital advantage. We intend to use this low cost, readily available capital to build out our portfolio and to attract and retain exceptional professionals. With only a two per cent cash election by Cole stockholders, we take this as a vote of confidence from the Cole stockholders that ARCP can continue to grow its portfolio aggressively while building out its intellectual capital and further to this, its bench strength."