Think of the future

20 March 2013 By Robert Cyran Follow @rob_cyran

American Realty’s offer for Cole Credit III is a better deal than the target’s plan to buy its adviser and go public. But Cole’s investors don’t get a vote. So American Realty’s only leverage is to dangle the prospect of reputational damage to appeal to insiders’ long-term greed.

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American Realty Capital Properties (ARCP) said on March 20 that it had made a hostile offer to buy unlisted Cole Credit Property Trust III for $5.7 billion in stock and cash. It is offering $12 a share in cash, or 0.8 share of its own stock for each Cole III share. The stock offer contains a floor guaranteeing that the minimum value for those who take stock will be $12. ARCP also said that it will raise its annual dividend upon closing the deal from 90 cents to 93 cents per share.
ARCP also asked Cole III to end its plan to acquire its adviser, Cole Holdings. Cole III has offered $20 million in cash and 10.7 million shares for Cole Holdings. It will additionally pay 2.1 million shares when the stock is listed, and may pay additional shares in 2017 based on the firm’s performance. As part of the transaction, Cole Holdings would reduce its management fee by 25 percent.
ARCP stated that it would reconsider its offer should Cole III acquire Cole Holdings.

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