American Realty Capital Properties Inc. (ARCP) has agreed to buy
CapLease Inc. (LSE) for about $2.2 billion including debt, a deal
the real estate investment trust said will expand and diversify its
property portfolio, fortify its credit quality and reduce tenant
concentration.
Shares of CapLease jumped 20% to $8.50 in recent trading,
meeting the per-share offer price and representing a 20% premium to
Friday's closing price. Each share of Series A, Series B and Series
C preferred stock will be converted into the right to receive $25
in cash plus an amount equal to any accrued and unpaid
dividends.
The deal with CapLease comes only a few weeks after Cole Credit
Property Trust III Inc. rejected an increased buyout offer from
American Realty, saying its unfunded proposal lacked credibility
and undervalued the nontraded REIT. American Realty in March had
increased its offer for Cole Credit to $9.7 billion, including the
assumption of debt, to account for its planned acquisition of Cole
Holdings Corp.
As for the latest deal, American Realty said it will take on
about $580 million of CapLease's $1.2 billion of outstanding debt
and repay the balance.
The deal will increase American Realty's properties by over 70
to about 800 owned under long-term and medium-term leases to major
commercial and retail tenants.
"In an industry where size matters, ARCP combined with CapLease
has managed to construct a combination that is of sufficient order
of magnitude and financial strength so as to compare very favorably
to its competitive set," American Realty President Michael Weil
said.
The transaction will immediately boost operating results by 10%.
American Realty raised its earnings view for 2014 by 28% to between
$1.17 to $1.21 a share based on adjusted funds from operations. The
deal is expected to generate about 11 cents a share in additional
adjusted funds from operations annually.
American Realty said the deal will allow it to increase
dividends to its stockholders by three cents a share to an
annualized rate of 94 cents a share.
The merger agreement provides for a "go-shop" period ending on
July 7, during which CapLease will actively solicit alternate
proposals. If CapLease terminates the deal for a superior proposal,
it will pay $15 million to American Realty.
Shares of American Realty were halted in recent trading.
Write to Saabira Chaudhuri at saabira.chaudhuri@dowjones.com
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