American Realty to Buy Cole in $11.2B Deal

American Realty Capital Properties said it would buy Cole Real Estate Investments for about $7 billion to create one of the largest commercial real estate investment trusts (REIT) in the United States.

American Realty shares rose 3 percent in early trading as the company finally sealed the deal after being rebuffed twice by Cole earlier this year.

Cole, which was privately held then, rejected the raised $6.7 billion offer in March and went on to list itself on the New York Stock Exchange in June.

American Realty said the Cole acquisition would increase the size of its portfolio to 3,732 properties, toppling Realty Income Corp as the largest net-lease REIT.

The deal will add many more Walgreens and CVS pharmacies to American Capital's current portfolio that includes Dollar General, Citizens Bank and FedEx.

Net-lease REITs have been attracting investors as tenants pick up most of the operating costs and the properties are leased for long periods, performing like a high-dividend bond.

The net-lease industry has been consolidating, given the low-interest environment. Interest rates are still at historic lows, giving buyers waiting on the fence a push to pick up properties.

ARCP bought American Realty Capital Trust IV in July for $3.1 billion. It bought CapLease for about $2.2 billion in May.

Cole Credit Property Trust II merged with Spirit Realty Capital Inc in January. Realty Income bought American Realty Capital Trust Inc for about $1.93 billion in September 2012.


American Realty said it would offer either 1.0929 of its shares or $13.82 in cash for each Cole share.

The stock offer is valued at $14.59 per Cole share based on American Realty's Tuesday close, representing a premium of 14 percent to Cole's closing price.

Cole shares were trading at $14.52 on the New York Stock Exchange on Wednesday.

The deal, valued at about $11 billion including debt, is expected to close in the first half of 2014, following which American Realty will raise its dividend by 6 cents to $1.

ARCP said it expects adjusted funds from operations for 2014 to be between $1.13 and $1.19 per share.

Barclays and RCS Capital, the investment banking division of Realty Capital Securities LLC, were financial advisers to ARCP. Goldman Sachs was the exclusive financial adviser to Cole.