UPDATED AT 1:18 PM
The special committee of the board of directors of Cole Credit Property Trust III Inc. (CCPT III) affirmed its commitment to the previously announced definitive merger agreement pursuant to which CCPT III will acquire Cole Holdings Corp., a full-scale real estate investment management firm that currently manages over $12 billion of real estate assets.
The announcement came in response to American Realty Capital’s $9 billion buyout offer for CCPT III. The special committee has reviewed the unsolicited proposal from American Realty and has determined that the proposed sale of CCPT III to ARCP at this time would not be in the best interests of CCPT III and its stockholders.
American Realty Capital issued a response to the CCPT III announcement saying it was "not only surprised, but disappointed, by today’s utterly unresponsive statement."
Upon the completion of the acquisition of Cole Holdings, CCPT III will change its name to Cole Real Estate Investments, Inc. and will pursue a listing on the New York Stock Exchange. The combined entity will have more than 350 employees, as well as a portfolio of more than 2,000 properties with over 76 million sq. ft. of corporate real estate under management. The transaction is expected to be immediately accretive to CCPT III’s funds from operations and to support an increase in the company’s annualized dividend rate to $0.70 per share upon closing.
According to CCPT III, the proposed transaction will have several benefits CCPT III stockholders, including adding a proven real estate management platform; providing management continuity and a seamless integration; an increased dividend; liquidity for shareholders; greater access to capital markets; new fee income; and elimination of external management fees.
On March 18, 2013, the transaction was granted early termination by the U.S. Federal Trade Commission under the mandatory waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. CCPT III’s acquisition of Cole Holdings is expected to close in the second quarter of 2013. CCPT III will seek stockholder approval to amend its charter to eliminate provisions applicable to non-listed companies and to more closely reflect the charters of its publicly traded peers at its annual meeting to be held in June 2013. Cole Real Estate Investments intends to list its common shares on the NYSE promptly after the charter is amended.
Goldman, Sachs & Co. and Lazard serve as financial advisors, and Wachtell, Lipton, Rosen & Katz and Venable LLP serve as legal advisors to the Special Committee of the Board of Directors of CCPT III. Morris, Manning & Martin, LLP serves as legal advisor to CCPT III.
American Realty's response
American Realty issued a sharply-worded response hours after Cole announced its intentions to proceed with its previous plans.
"RCP finds it remarkable that CCPT III and its board of directors have rejected the company’s proposal, which offers CCPT III’s stockholders superior value and certainty as compared to the proposed acquisition and internalization of Cole Holdings, without seeking to contact ARCP or better understand its offer in any way," the statement read. "It is insufficient for CCPT III merely to assert that its previously announced insider transaction is superior to ARCP’s proposal without providing stockholders and the broker community a single reason why that may be the case."
American Realty also said CCPT III's plan offers stockholders "uncertain value, uncertain liquidity, and an uncertain future, all while refusing to allow them a vote. ARCP also believes that, should the internalization be consummated, there exists significant potential for a diminution of value for CCPT III’s stockholders, which may result in the reduction of ARCP’s proposed valuation of CCPT III."