Boston, MA 10/28/2013 (wallstreetpr) – Cole Real Estate Investments Inc (NYSE:COLE) is set to merge with American Realty Capital Properties (NASDAQ:ARCP). The deal valued at $11.2 billion will see American Realty pay $6.85 billion to shareholders of Cole and also take over outstanding debt of the company. The shareholders of Cole will have options of receiving 1.0929 shares of American Realty or $13.82 in cash per share. In the first half of 2014 the merger is expected to close. American Realty has been chasing Cole for quite some time. Cole became a publicly traded REIT only some time back. American Realty had offered to takeover Cole even before the IPO was announced. After being rebuffed by Cole, American Realty announced a skew of takeovers and mergers.
The assimilation is expected to create an enterprise worth $21.5 billion, 64% greater than the nearest competitor. Both companies operate in the same business space of net-leasing and the merger will lead to several strategic consolidations. Both companies own free standing buildings that are leased on long term basis to corporate tenants. The merged entity will have 3,732 properties with 99% occupancy rate. The average lease will run for the next 11 years. These properties are leased to more than 600 corporate tenants.
The deal is seen to be beneficial to American Reality. The company will be able to reduce its net debt to EBITDA ratio from current 9.1x to 7.7x. The portfolio will get more diversified and American Realty will no longer have to compete with Cole. Doubts have been raised whether the deal will similarly benefit Cole’s shareholders. The second quarter results announced in August, 2013 saw Coles revenues rise by 91%, with increase of 40% in consolidated normalized EBITDA and 26% rise in net income. Cole’s shares are already trading at $14.54. The deal may face legal hurdles as many lawsuits are being considered to challenge Cole’s acceptance of the merger conditions.
