Cole Credit Property Trust III rejected a $5.7 billion buyout offer from American Realty Capital Properties Inc., saying it isn’t in the best interests of shareholders and is an attempt to disrupt its business.
The Phoenix-based nontraded real estate investment trust still plans to buy the company that sponsors it, Cole Holdings Corp., according to a statement today. American Realty yesterday bid $12 in cash or 0.80 of each share of its common stock for each Cole Credit share, seeking to create one of the largest REITs that leases space to single tenants.
Cole Credit, owner of more than 900 mostly single-tenant office, retail and industrial properties, agreed earlier this month to buy Cole Holdings with plans to go public after the merger. The acquisition would immediately add to Cole Credit’s funds from operations, a measure of cash flow used by REITs, and would support a dividend increase to 70 cents a share from 65 cents, according to the statement.
American Realty “was not only surprised, but disappointed” that Cole Credit rejected the bid “without seeking to contact ARCP or better understand its offer in any way,” the New York-based company said in its own statement today.
The American Realty offer is “misleading” and wasn’t meant for serious consideration, Cole Credit said in a separate letter to its business partners. The proposal instead appeared to be “deliberately designed to disrupt the businesses of Cole Holdings and CCPT III,” according to the letter, signed by Cole Holdings Executive Chairman Christopher Cole and Chief Executive Officer Marc Nemer.
The executives said American Realty made the offer public only 12 hours after submitting it to Cole Credit’s board.
Buying Cole Holdings is superior to the American Realty deal in part because the resulting company would be self-managed, rather than run by an external firm, according to the letter. About 75 percent of the properties American Realty would own would be from Cole, Nemer and Cole said.
Cole Holdings, based in Phoenix, manages more than 76 million square feet (7 million square meters) of properties. Cole Credit said it expects to complete the purchase by the end of June.
Tony DeFazio, an American Realty spokesman, said the company was preparing a response to the letter.
American Realty said it remains committed to its offer, which it values at more than $9 billion, including assumed debt, and that it’s prepared to discuss it with Cole Credit.