GNL Post-closing Will Be Third Largest
Publicly Traded Net Lease REIT with a Global
Presence
Adopts Enhanced Corporate Governance
Practices; Internalization of Management to Support Scaled
Platform
Approximately $75
Million in Expected Cost Synergies and Internalization
Savings
All-Stock Transaction Projected to be More
Than 9% Accretive to GNL Q1'23 AFFO Per Share
NEW
YORK, May 23, 2023 /PRNewswire/ -- Global Net
Lease Inc. (NYSE: GNL, "GNL") and The Necessity Retail REIT Inc.
(NASDAQ: RTL, "RTL") announced today that they have entered into a
definitive merger agreement (the "Merger Agreement"), under which
GNL will acquire RTL in an all-stock transaction (the "Merger").
GNL and RTL have also entered into a definitive agreement that will
result in the combined entity becoming internally managed, with the
external asset and property management functions currently
performed by affiliates of AR Global, LLC (the "External Manager")
being internalized (the "Internalization," together with the
Merger, the "Transactions"). The combined internally managed
company, which will operate as Global Net Lease ("GNL
Post-closing"), is expected to own and manage over 1,350 properties
and have an aggregate real estate asset value of approximately
$9.6 billion at the closing of the
Transactions.
GNL Post-closing will also adopt enhanced corporate governance
practices. In connection with the close of the Transactions, GNL
Post-closing will opt out of the classified board provision of the
Maryland Unsolicited Takeovers Act ("MUTA"), declassify its
Board of Directors, repeal the Company's Stockholder Rights Plan
(commonly referred to in the industry as a "poison pill"), and
amend bylaws that currently require up to two board members to be
"managing directors." The Internalization is projected to generate
approximately $54 million in annual
cash savings and the Merger is projected to generate approximately
$21 million in annual cash savings
realized within 12 months of transaction close, totaling
approximately $75 million in expected
annual savings.
The Transactions were unanimously recommended by the Special
Committees of the Boards of Directors of both GNL and RTL,
comprised of independent directors, and approved by the full Boards
of Directors. The Transactions are expected to close in the third
quarter of 2023, subject to the satisfaction of closing conditions
and approval by the stockholders of GNL and RTL.
P. Sue Perrotty, Chair of the GNL
Board of Directors, said, "The merger of Global Net Lease and The
Necessity Retail REIT is an exceptional opportunity to build a
premier global net lease portfolio with very attractive future
prospects. GNL Post-closing's enhanced corporate governance is
highlighted by a majority-independent, declassified Board, as well
as other enhancements that we are proud to institute. Combined with
the internalization of management, we are realizing significant
cost savings to our stockholders. I am honored to have the
opportunity to lead an experienced and diverse group that is
dedicated to building the long-term value of GNL."
Summary of the Merger's Strategic Benefits
The Merger is expected to create several operational and
financial benefits for GNL Post-closing, including:
- Immediately Accretive: The Transactions are expected to
be more than 9% accretive in Q4'23 relative to GNL's Q1'23 adjusted
funds from operations ("AFFO") per share on an annualized
basis.
- Reduced Leverage: Net debt to annualized adjusted EBITDA
is expected to be reduced from 8.3x for GNL in Q1'23 and 9.6x for
RTL in Q1'23 to an estimated 7.6x in Q4'23 for GNL
Post-closing.
- Significantly Increased Size, Prominence, and Scale:
Based on portfolios as of March 31,
2023, the Merger will create the third largest publicly
traded net lease REIT with a global presence. GNL Post-closing will
achieve greater diversity by geography, asset type, tenant, and
industry, spanning industrial, retail, and office assets across
North America and Europe, allowing for greater balance sheet
flexibility and the ability to grow and optimize the portfolio. As
a larger entity, GNL post-closing is expected to have access to
larger asset and portfolio acquisitions with reduced concentration
and integration risk and expected to have greater access to
capital. GNL Post-closing's portfolio is anticipated to consist of
1,356 properties in 49 different states and 11 different countries,
and top 10 tenant concentration is expected to be 19.2% of
straight-line rent.
- Substantial Corporate Synergies and Cost Savings: The
combination of GNL and RTL is expected to create a more efficient
and competitive platform through the integration of adjacent best
practices and reduction of equivalent functions, including
corporate consolidation, public company cost savings, and
elimination of other duplicative services. Annual run-rate cost
savings are projected to be approximately $21 million realized within 12 months of the
close of the Transactions.
- Attractive Dividend: GNL expects that, post closing, the
GNL Post-closing Board will establish a new dividend policy of
paying a quarterly dividend equal to $0.354 per share ($1.42 per share, annualized). Q4'23 AFFO expected
to be $0.42 per share ($1.68 per share, annualized).
Summary of the Internalization Transaction's Strategic
Benefits
The Internalization is expected to enhance corporate governance,
as well as provide a number of operational and financial benefits,
including:
- Substantial Cost Savings: The Internalization is
projected to result in annual cash savings of approximately
$54 million through elimination of
the asset management fees, property management fees, incentive
fees, equity issuance fees, and reimbursable expenses currently
payable to the External Manager, net of internalized employee
compensation, rent and overhead, and excluding the one-time costs
associated with the Transactions.
- Simplified Company Structure: The Internalization is
expected to simplify GNL Post-closing's structure through the
unification of all investment activities, corporate operations, and
resources under a single, transparent organization. Internalizing
management will provide GNL Post-closing control over key functions
that are critical to both the growth of its business and maximizing
stockholder value.
- Valuation: It is anticipated that there is significant
potential for trading multiple expansion as investors recognize the
value created through the Transactions, as internally managed peers
have historically traded at significantly higher multiples than
externally managed REITs.
Key Corporate Governance Updates
GNL Post-closing is dedicated to enhancing its corporate
governance by committing to the following actions substantially
concurrently with the close of the Transactions:
- The Board of Directors of GNL Post-closing intends to opt
out of the classified board provision of MUTA under the terms of
the Merger Agreement.
- Declassify its Board of Directors, so that seven of the nine
directors would stand for election to annual terms at the 2024
annual meeting of stockholders, and all nine directors would stand
for election to annual terms at the 2025 annual meeting.
- Repeal Company's Stockholder Rights Plan (commonly referred
to in the industry as a 'poison pill').
- Amend bylaws to delete the requirement that up to two
board members to be "managing directors."
Company Leadership
GNL Post-closing will have a highly diverse and experienced
Board of Directors that has essential knowledge and familiarity to
oversee GNL Post-closing and ensure its long-term initiatives and
performance. Upon completion of the Merger, the size of the GNL
Board of Directors will be expanded to nine members, including the
members of the current GNL Board and three independent RTL
directors. GNL's current independent chairperson will remain in her
position.
Current GNL Chief Executive Officer James Nelson and current RTL Chief Executive
Officer Michael Weil will become
Co-Chief Executive Officers. Mr. Weil will be the sole Chief
Executive Officer upon Mr. Nelson's retirement in April 2024. Current GNL Chief Financial Officer
Chris Masterson will remain in his
position with GNL Post-closing.
Transaction Terms
Under terms of the Merger Agreement, RTL stockholders will
receive 0.670 shares of GNL for each common share of RTL, which
represents a total consideration of $7.08 per share based on share prices as of
May 23, 2023 and a 35% premium to
RTL's 30-day volume-weighted average price. Following closing of
the Transactions, based on the stated fixed exchange ratio of
0.670, GNL stockholders are expected to own approximately 45% of
GNL Post-closing, RTL stockholders are expected to own
approximately 39%, and the owner of the former External Manager and
its affiliates are expected to own up to 17%.
Pursuant to the internalization agreement, upfront consideration
to the External Manager will consist of $325
million of GNL stock and $50
million in cash. In connection with the Transactions, the
aggregate share ownership limit for the Company's charter will be
reduced to 8.9%. In addition, GNL has granted a waiver to the
External Manager and certain owners thereof to own more than the
8.9% limit, effective at the closing of the Transactions. After
giving effect to the Transactions, the External Manager and its
affiliates are expected to own up to 17%, effective immediately
upon closing of the Transactions.
The Merger Agreement provides RTL with a go-shop period of 30
days, during which the Special Committee of the RTL Board of
Directors and its advisors may actively solicit alternative
proposals from third parties, subject to certain limited
exceptions. RTL will have the right to terminate its respective
Merger Agreement with GNL to accept a superior proposal, subject to
the terms and conditions of the Merger Agreement. There can be no
assurance that this "go-shop" process will result in superior
proposals, and RTL does not intend to disclose developments with
respect to the solicitation process unless and until the Special
Committee of their Board of Directors make a determination with
respect to any potential superior proposal.
GNL has made a presentation detailing the highlights of the
proposed Transactions available at
investors.globalnetlease.com.
Advisors
The GNL Special Committee, consisting entirely of independent
directors, was advised by BMO Capital Markets Corp. as its
exclusive financial advisor and Shapiro
Sher as its legal counsel. The RTL Special Committee,
consisting entirely of independent directors, was advised by Truist
Securities as its exclusive financial advisor and Arnold &
Porter Kaye Scholer LLP as its legal counsel. The External
Manager was advised by Paul, Weiss, Rifkind, Wharton & Garrison
LLP.
About Global Net Lease, Inc.
Global Net Lease, Inc. is a publicly traded real estate
investment trust listed on the NYSE, which focuses on acquiring a
diversified global portfolio of commercial properties, with an
emphasis on sale-leaseback transactions involving single tenant,
mission critical income producing net-leased assets across
the United States, Western, and
Northern Europe.
About The Necessity Retail REIT, Inc.
The Necessity Retail REIT, Inc. is the preeminent publicly
traded real estate investment trust focused on "Where America
Shops", which acquires and manages a diversified portfolio of
necessity-based retail single tenant and open-air shopping center
properties in the U.S.
Important Notice
The statements in this press release that are not historical
facts may be forward-looking statements. These forward-looking
statements involve risks and uncertainties that could cause actual
results or events to be materially different. In addition, words
such as "may," "will," "seeks," "anticipates," "believes,"
"estimates," expects," "plans," "intends," "would," or similar
expressions indicate a forward-looking statement, although not all
forward-looking statements contain these identifying words. Any
statements referring to the future value of an investment in GNL,
including the adjustments giving effect to the Merger and the
Internalization as described in this press release, as well as the
potential success that GNL may have in executing the Merger and
Internalization, are also forward-looking statements. There are a
number of risks, uncertainties and other important factors that
could cause GNL's actual results, or GNL's actual results after
making adjustments to give effect to the Merger and the
Internalization, to differ materially from those contemplated by
such forward-looking statements, including but not limited to: (i)
GNL's and RTL's ability to complete the proposed Merger and
Internalization on the proposed terms or on the anticipated
timeline, or at all, including risks and uncertainties related to
securing the necessary stockholder approvals and satisfaction of
other closing conditions to consummate the proposed transaction,
(ii) the occurrence of any event, change or other circumstance that
could give rise to the termination of the Merger Agreement relating
to the proposed Transactions, (iii) ability of GNL to obtain lender
consent to amend its Second Amended and Restated Credit Facility or
any other Company loan agreement, if at all, or on terms favorable
to the Company, (iv) risks related to the potential repeal of GNL's
Stockholder Rights Plan; (v) risks related to the decrease in the
beneficial ownership requirements of GNL's applicable classes and
series of stock; (vi) risks related to diverting the attention of
GNL's and RTL's management from ongoing business operations, (vii)
failure to realize the expected benefits of the proposed
Transactions, (viii) significant transaction costs and/or unknown
or inestimable liabilities, (ix) the risk of stockholder litigation
in connection with the proposed transaction, including resulting
expense or delay, (x) the risk that RTL's business will not be
integrated successfully or that such integration may be more
difficult, time-consuming or costly than expected, (xi) risks
related to future opportunities and plans for the GNL Post-closing,
including the uncertainty of expected future financial performance
and results of GNL Post-closing following completion of the
proposed Transactions, (xii) the effect of the announcement of the
proposed Transactions on the ability of GNL and RTL to operate
their respective businesses and retain and hire key personnel and
to maintain favorable business relationships, (xiii) the
effect of any downgrade of the GNL's or RTL's corporate rating or
to any of their respective debt or equity securities; (xiv) risks
related to the market value of the GNL's common stock to be issued
in the proposed Transactions; (xv) other risks related to the
completion of the proposed Transactions, (xvi) potential adverse
effects of the ongoing global COVID-19 pandemic, including actions
taken to contain or treat the COVID-19, on the Company, the
Company's tenants and the global economy and financial market, as
well as the additional risks, uncertainties and other important
factors set forth in the "Risk Factors" and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" sections of GNL's Annual Report on Form 10-K for the
year ended December 31, 2022 filed
with the SEC on February 23, 2023,
and all other filings with the SEC after that date, as such risks,
uncertainties and other important factors may be updated from time
to time in the Company's subsequent reports. Further,
forward-looking statements speak only as of the date they are made,
and the Company undertakes no obligation to update or revise
forward-looking statements to reflect changed assumptions, the
occurrence of unanticipated events or changes to future operating
results over time, except as required by law.
In connection with the proposed Merger and Internalization and
the related proposed transactions, GNL intends to file with the SEC
a registration statement on Form S-4, which will include a document
that serves as a prospectus of GNL and a joint proxy statement of
GNL and RTL (the "joint proxy statement/prospectus"). Each party
also plans to file other relevant documents with the SEC regarding
the Merger and the Internalization and all related proposed
transactions. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE
JOINT PROXY STATEMENT/PROSPECTUS AND OTHER RELEVANT DOCUMENTS FILED
WITH THE SEC WHEN THEY BECOME AVAILABLE, BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION ABOUT THE MERGER AND THE INTERNALIZATION AND
THE RELATED PROPOSED TRANSACTIONS. Investors and securityholders
may obtain a free copy of the joint proxy statement/prospectus (if
and when it becomes available) and other relevant documents filed
by GNL with the SEC at the SEC's website at www.sec.gov. Copies of
the documents filed by GNL with the SEC will be available free of
charge on GNL's website at www.globalnetlease.com or by contacting
GNL's Investor Relations at
investorrelations@globalnetlease.com.
Participants in the Proxy Solicitation
GNL, RTL, GNL OP, RTL OP, Advisor Parent, GNL Advisor and RTL
Advisor, and their respective directors, executive officers and
other members of management and employees may be deemed to be
participants in the solicitation of proxies in respect of the
proposed Transactions. Information about directors and executive
officers of GNL is available in the GNL proxy statement for its
2023 Annual Meeting, which was filed with the SEC on April 10, 2023. Information about directors and
executive officers of RTL is available in the RTL proxy statement
for its 2023 Annual Meeting, which was filed with the SEC on
April 10, 2023. Other information
regarding the participants in the proxy solicitation and a
description of their direct and indirect interests, by security
holdings or otherwise, will be contained in the joint proxy
statement/prospectus and other relevant materials filed with the
SEC regarding the proposed transactions when they become available.
Investors should read the joint proxy statement/prospectus
carefully when it becomes available before making any voting or
investment decisions. Investors may obtain free copies of these
documents from GNL and RTL as indicated above.
Contacts
Investors and Media:
Email: investorrelations@globalnetlease.com
Phone: (212) 415-6510
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SOURCE The Necessity Retail REIT, Inc.; Global Net Lease,
Inc.