American Realty Capital Trust III Sued Over Acquisition

American Realty Capital Trust III Inc. was sued by a shareholder in New York state court over a proposed acquisition by American Realty Capital Properties Inc. announced last month.

American Realty Capital Properties agreed to buy American Realty Capital Trust III, or ARCT III, a non-traded real estate investment trust, to expand its holdings of properties leased to single tenants.

ARCT III shareholder Randell Quaal sued the New York-based company, its directors and American Realty Capital Properties in state court in Manhattan today, accusing them of failing to maximize shareholder value.

“The proposed transaction offers ARCT III shareholders inadequate consideration for their shares, particularly in light of rising commercial real-estate prices in the period following the issuance of ARCT III shares, the high fees associated with the purchase of non-traded REIT shares, and the definitive proxy’s failure to provide shareholders with any comparative premiums for similar acquisitions,” Quaal said in a court filing.

Both companies are managed by affiliates of American Realty Capital, a New York-based real estate investor. American Realty Capital Properties started trading on the Nasdaq Stock Market in September 2011. Nicholas Schorsch is chairman and chief executive officer of each of the entities, according to regulatory filings.

‘Best Interests’

“The company will respond to the lawsuit in due course,” American Realty Capital said in a statement. “Management continues to believe that the proposed merger is in the shareholders’ best interests, and it hopes that the transaction will be approved.”

ARCT III shareholders may receive $12 a share in cash or 0.95 of a share of American Realty Capital Properties, equal to $12.26 based on the Dec. 14 closing price, New York-based American Realty Capital Properties said last month. The cash consideration will be capped at 30 percent of American Realty Capital Trust shares outstanding.

ARCT III had about 134 million common shares outstanding at the end of September, according to a regulatory filing, suggesting a deal value of about $1.6 billion.

The case is Quaal v. American Realty Capital Trust III Inc., 650329/2013, New York State Supreme Court, New York County (Manhattan).

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