Click here to close now.

Welcome!

.NET Authors: Elizabeth White, Liz McMillan, Pat Romanski, Jaynesh Shah, Carmen Gonzalez

News Feed Item

American Realty Capital Trust Reaffirms Merger Recommendation with Realty Income and Comments on ISS Recommendation

Egan-Jones Recommends ARCT Stockholders Vote FOR Merger with Realty Income

NEW YORK, Jan. 2, 2013 /PRNewswire/ -- American Realty Capital Trust, Inc., (NASDAQ: ARCT) ("ARCT" or the "Company") today issued the following statement in response to Institutional Shareholder Services' ("ISS") recent report regarding the proposed merger of ARCT and Realty Income Corporation (NYSE: O) (Realty Income):

(Logo: http://photos.prnewswire.com/prnh/20120529/NY15153LOGO )

We continue to support the unanimous recommendations of both our board of directors and that of Realty Income in favor of a merger between our two companies for the reasons we have set forth in prior filings and press releases, and which are reiterated below. 

We strongly disagree with ISS' analysis, and believe that ISS reached the wrong conclusion in failing to recommend that ARCT stockholders vote for the proposed merger between ARCT and Realty Income. 

Importantly, ISS's valuation analysis fails to take into consideration the technical nature of the net lease REIT sector and certain key REIT industry metrics.  Specifically, ISS has overlooked the following key facts: ARCT's real estate assets are being acquired at a record price as measured by capitalization rate; (ii) the acquirer, Realty Income, is consistently one of the best performing REITs in the industry; (iii) Realty Income's exceptionally strong balance sheet and credit ratings offer enormous cost of capital competitive advantages, particularly among its net lease peers. 

Based on the true drivers of value in the REIT market, the proposed merger with Realty Income represents not only a considerable value creation opportunity for ARCT stockholders, but also favorably positions the Company as part of Realty Income – both offensively for dynamic growth in FFO and dividends, and also defensively for when rates rise and size and diversity matter most:

    • On September 5, 2012, the offer value implied a weighted average capitalization rate for ARCT's assets of 5.9% based on current cash rents.  This is significantly below the weighted average capitalization rate of 8.2% paid by ARCT for its assets as well as the weighted average capitalization rates of similar transactions, which range from 7.1% - 8.25%. 
    • The 15.7x forward EBITDA multiple represents the second highest amongst similar REIT transactions.
    • Furthermore, the majority of the ARCT portfolio by value was assembled in 2010 to 2011, underscoring the value achieved within a short time period.

In addition, based on the implied offer value of $12.21 per share of ARCT common stock, Realty Income is offering a premium of:

    • 23.5% to ARCT's volume-weighted average price on its first day of trading of $9.89.
    • 12.3% to the average closing price per share of $10.87 since its NASDAQ listing on March 1, 2012, through the announcement of the merger.
    • 6.8% to ARCT's 30-calendar-day average share price of $11.43 prior to the announcement of the merger.

We reiterate our board of directors' unanimous recommendation that stockholders vote "FOR" the proposed merger at the January 16, 2013, Special Meeting of ARCT stockholders.  In making its recommendation, ARCT's board considered the premium valuation as well as the following factors that ISS fails to highlight in its analysis:

    • Ideal Buyer: Realty Income represents the ideal strategic buyer for ARCT given its business focus, size and scale, investment grade balance sheet, low cost of capital and share liquidity.  Realty Income's experienced management team has a successful track record of driving dividend growth and producing enhanced stockholder returns.  Since 1970, Realty Income has paid 509 consecutive monthly dividends and has increased its monthly dividend 69 times since listing on the NYSE in 1994.  Importantly, ARCT stockholders will become owners of the best performing net lease REIT.  This strongly defensive stock was the 16th best performing among the universe of 125 listed REITs from 2008 to 2012, and the 22nd best performing stock in the REIT industry from 2003 to 2012[1]. 
    • Higher Risk-Adjusted Returns: We believe ARCT stockholders will benefit from superior risk-adjusted returns due to the enhanced stability and diversity of the combined property portfolio.  The combined company will be significantly larger and financially stronger than ARCT as a stand-alone company or than its competitors, and will have one of the lowest costs of capital in a sector where low cost capital creates substantial competitive advantage.  In addition, the combined company's greater scale and balance sheet strength will facilitate the execution of large transactions through improved access to capital, further enhancing the Company's ability to realize value in the relatively fragmented net lease real estate market.
    • Lower Cost of Capital: Access to Realty Income's long-term, fixed-rate debt will enable ARCT stockholders to enjoy reduced exposure to secured and floating rate debt as a percentage of assets and increased weighted average debt maturity.  On a standalone basis, ARCT's goal to reduce the use of floating rate and secured debt and increase debt duration in order to improve its Ba2/BB credit ratings is subject to significant timing and execution risks. Pro forma for the transaction, the combined company will be rated Baa1/BBB/BBB+ and will enjoy a much longer weighted average debt maturity than ARCT standalone (7.8 years vs. 4.1 years), further solidifying the viability and durability of distributable cash flows and dividends.
    • Aligned Interests: ARCT's management's interests are firmly aligned with all ARCT stockholders.  Pro forma for the transaction, ARCT management will own approximately $45 million of equity in Realty Income, including over $25 million of existing equity in ARCT.
    • Comprehensive Strategic Process: Before concluding that the merger with Realty Income was in the best interests of ARCT stockholders, ARCT's board undertook a comprehensive strategic process in which it evaluated a number of alternatives. Since announcement of the transaction, no third party has approached ARCT or its advisors with an alternative transaction or with a request for information despite the low break fee of approximately 1.7% of the transaction value.

Should our shareholders fail to ratify this merger, however, the ARCT management team will continue to operate and grow the Company consistent with our established operating, investment and capitalization strategies. 

Egan-Jones Recommends the Merger: The Company noted that Egan-Jones, an independent proxy advisory firm, has reviewed the proposed transaction and advised ARCT stockholders to vote FOR the Realty Income transaction.  In its December 17, 2012 report, Egan-Jones stated[2]:

"Based on our review of publicly available information on strategic, corporate governance and financial aspects of the proposed transaction, Egan-Jones views the proposed transaction to be a desirable approach in maximizing shareholder value and recommends that clients holding shares of AMERICAN REALTY CAPITAL TRUST vote "FOR" this Proposal."

Summary of Terms of Merger, Proxy and Special Meeting: As previously announced on September 6, 2012, ARCT entered into a definitive agreement with Realty Income, under which Realty Income will acquire all of the outstanding shares of ARCT in an all-stock merger though which ARCT stockholders will receive a fixed exchange ratio of 0.2874 Realty Income shares for each share of American Realty Capital Trust common stock that they own.

Stockholders are encouraged to read the definitive proxy statement filed by ARCT on December 6, 2012, in its entirety, as it provides, among other things, a detailed discussion of the process that led to the proposed merger and the reasons behind the board of directors' recommendation that stockholders vote "FOR" the proposed merger with Realty Income.  Stockholders may obtain free copies of this and other documents filed with the SEC free at the SEC's website www.sec.gov.

A Special Meeting of ARCT stockholders to consider and vote on the proposal to approve the merger and the other transactions contemplated by the merger agreement has been scheduled for January 16, 2013 at 9:00 AM ET, at The Core Club located at 66 East 55th Street, New York, New York, 10022.  Stockholders of record of the Company as of December 6, 2012, will be entitled to vote at the Special Meeting.

Whether or not stockholders are able to attend the Special Meeting in person, the board urges all stockholders to vote "FOR" the proposed merger with Realty Income by signing and dating and returning the WHITE proxy card today. Internet and telephone voting options are also available and easy to follow instructions may be found in the proxy.  Even if stockholders have already voted against the transaction, they can still change their vote.  Signing a proxy card today cancels any card previously signed and returned.  Only the latest dated proxy, Internet or telephone vote counts.  Stockholders who have any questions or need assistance voting their shares should call the Company's proxy solicitor, D.F. King & Co., Inc., toll free at 1‐800‐714‐3305.

About the Company
American Realty Capital Trust, Inc., a publicly traded Maryland corporation listed on The NASDAQ Global Select Market under the trading symbol "ARCT", is a leading self‐administered real estate company that owns and acquires single tenant free standing commercial real estate properties that are primarily net leased on a long‐term basis to investment grade rated and other creditworthy tenants. Additional information about the Company can be found on the Company's website at www.arctreit.com.

Additional Information and Where to Find It
In connection with the proposed merger, the Company and Realty have filed a definitive proxy statement with the SEC on December 6, 2012 and commenced mailing the definitive proxy statement and a form of proxy to the stockholders of the Company. BEFORE MAKING ANY VOTING DECISION, INVESTORS ARE URGED TO READ THE DEFINITIVE PROXY STATEMENT REGARDING THE PROPOSED MERGER CAREFULLY AND IN ITS ENTIRETY BECAUSE THE PROXY STATEMENT CONTAINS IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER. Investors will be able to obtain, without charge, a copy of the definitive proxy statement and other relevant documents filed with the SEC from the SEC's website at http://www.sec.gov. Copies of the documents filed by the Company with the SEC are also available free of charge on the Company's website at http://ir.arctreit.com, and copies of the documents filed by Realty with the SEC are available free of charge on Realty's website at http://www.realtyincome.com.

Participants in Solicitation
The Company, Realty and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the Company's and Realty's stockholders in respect of the proposed merger. Information regarding the Company's directors and executive officers can be found in the Company's definitive proxy statement filed with the SEC on May 21, 2012. Information regarding Realty's directors and executive officers can be found in Realty's definitive proxy statement filed with the SEC on March 30, 2012. Stockholders may obtain additional information regarding the interests of the Company and its directors and executive officers in the proposed merger, which may be different than those of the Company's stockholders generally, by reading the definitive proxy statement filed in connection with the proposed merger with the SEC on December 6, 2012 and other relevant documents regarding the proposed merger filed with the SEC. These documents are available free of charge on the SEC's website and from the Company or Realty, as applicable, using the sources indicated above.

Forward-Looking Statements
Information set forth herein (including information included or incorporated by reference herein) contains "forward-looking statements" (as defined in Section 21E of the Securities Exchange Act of 1934, as amended), which reflect the Company's and Realty's expectations regarding future events. The forward-looking statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those contained in the forward-looking statements. Such forward-looking statements include, but are not limited to whether and when the transactions contemplated by the merger agreement will be consummated, the new combined company's plans, market and other expectations, objectives, intentions and other statements that are not historical facts.

The following additional factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: the ability of the company and Realty to obtain the stockholder approvals required to consummate the proposed merger; unexpected costs or unexpected liabilities that may arise from the transaction, whether or not consummated; the inability to retain key personnel; continuation or deterioration of current market conditions; future regulatory or legislative actions that could adversely affect the companies; and the business plans of the customers of the respective parties. Additional factors that may affect future results are contained in the Company's and Realty's filings with the SEC, which are available at the SEC's website at www.sec.gov. The Company and Realty disclaim any obligation to update and revise statements contained in these materials based on new information or otherwise.

[1] 125 listed REITs encompass all REITs in the NAREIT index with equity market cap greater than $250 million.  Companies are excluded where total return data is not available for a given time period.  Rankings include 106 and 87 companies for the time periods 2008-2012 and 2003-2012, respectively.

[2] Permission to use quotation was neither sought nor obtained.

SOURCE American Realty Capital Trust, Inc.

More Stories By PR Newswire

Copyright © 2007 PR Newswire. All rights reserved. Republication or redistribution of PRNewswire content is expressly prohibited without the prior written consent of PRNewswire. PRNewswire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

@ThingsExpo Stories
Wearable devices have come of age. The primary applications of wearables so far have been "the Quantified Self" or the tracking of one's fitness and health status. We propose the evolution of wearables into social and emotional communication devices. Our BE(tm) sensor uses light to visualize the skin conductance response. Our sensors are very inexpensive and can be massively distributed to audiences or groups of any size, in order to gauge reactions to performances, video, or any kind of presentation. In her session at @ThingsExpo, Jocelyn Scheirer, CEO & Founder of Bionolux, will discuss ho...
The true value of the Internet of Things (IoT) lies not just in the data, but through the services that protect the data, perform the analysis and present findings in a usable way. With many IoT elements rooted in traditional IT components, Big Data and IoT isn’t just a play for enterprise. In fact, the IoT presents SMBs with the prospect of launching entirely new activities and exploring innovative areas. CompTIA research identifies several areas where IoT is expected to have the greatest impact.
The 4th International Internet of @ThingsExpo, co-located with the 17th International Cloud Expo - to be held November 3-5, 2015, at the Santa Clara Convention Center in Santa Clara, CA - announces that its Call for Papers is open. The Internet of Things (IoT) is the biggest idea since the creation of the Worldwide Web more than 20 years ago.
Every day we read jaw-dropping stats on the explosion of data. We allocate significant resources to harness and better understand it. We build businesses around it. But we’ve only just begun. For big payoffs in Big Data, CIOs are turning to cognitive computing. Cognitive computing’s ability to securely extract insights, understand natural language, and get smarter each time it’s used is the next, logical step for Big Data.
There's no doubt that the Internet of Things is driving the next wave of innovation. Google has spent billions over the past few months vacuuming up companies that specialize in smart appliances and machine learning. Already, Philips light bulbs, Audi automobiles, and Samsung washers and dryers can communicate with and be controlled from mobile devices. To take advantage of the opportunities the Internet of Things brings to your business, you'll want to start preparing now.
17th Cloud Expo, taking place Nov 3-5, 2015, at the Santa Clara Convention Center in Santa Clara, CA, will feature technical sessions from a rock star conference faculty and the leading industry players in the world. Cloud computing is now being embraced by a majority of enterprises of all sizes. Yesterday's debate about public vs. private has transformed into the reality of hybrid cloud: a recent survey shows that 74% of enterprises have a hybrid cloud strategy. Meanwhile, 94% of enterprises are using some form of XaaS – software, platform, and infrastructure as a service.
P2P RTC will impact the landscape of communications, shifting from traditional telephony style communications models to OTT (Over-The-Top) cloud assisted & PaaS (Platform as a Service) communication services. The P2P shift will impact many areas of our lives, from mobile communication, human interactive web services, RTC and telephony infrastructure, user federation, security and privacy implications, business costs, and scalability. In his session at @ThingsExpo, Robin Raymond, Chief Architect at Hookflash, will walk through the shifting landscape of traditional telephone and voice services ...
Explosive growth in connected devices. Enormous amounts of data for collection and analysis. Critical use of data for split-second decision making and actionable information. All three are factors in making the Internet of Things a reality. Yet, any one factor would have an IT organization pondering its infrastructure strategy. How should your organization enhance its IT framework to enable an Internet of Things implementation? In his session at Internet of @ThingsExpo, James Kirkland, Chief Architect for the Internet of Things and Intelligent Systems at Red Hat, described how to revolutioniz...
For IoT to grow as quickly as analyst firms’ project, a lot is going to fall on developers to quickly bring applications to market. But the lack of a standard development platform threatens to slow growth and make application development more time consuming and costly, much like we’ve seen in the mobile space. In his session at @ThingsExpo, Mike Weiner is Product Manager of the Omega DevCloud with KORE Telematics Inc., will discuss the evolving requirements for developers as IoT matures and conduct a live demonstration of how quickly application development can happen when the need to comply...
Converging digital disruptions is creating a major sea change - Cisco calls this the Internet of Everything (IoE). IoE is the network connection of People, Process, Data and Things, fueled by Cloud, Mobile, Social, Analytics and Security, and it represents a $19Trillion value-at-stake over the next 10 years. In her keynote at @ThingsExpo, Manjula Talreja, VP of Cisco Consulting Services, will discuss IoE and the enormous opportunities it provides to public and private firms alike. She will share what businesses must do to thrive in the IoE economy, citing examples from several industry sector...
Container frameworks, such as Docker, provide a variety of benefits, including density of deployment across infrastructure, convenience for application developers to push updates with low operational hand-holding, and a fairly well-defined deployment workflow that can be orchestrated. Container frameworks also enable a DevOps approach to application development by cleanly separating concerns between operations and development teams. But running multi-container, multi-server apps with containers is very hard. You have to learn five new and different technologies and best practices (libswarm, sy...
SYS-CON Events announced today that DragonGlass, an enterprise search platform, will exhibit at SYS-CON's 16th International Cloud Expo®, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY. After eleven years of designing and building custom applications, OpenCrowd has launched DragonGlass, a cloud-based platform that enables the development of search-based applications. These are a new breed of applications that utilize a search index as their backbone for data retrieval. They can easily adapt to new data sets and provide access to both structured and unstruc...
With major technology companies and startups seriously embracing IoT strategies, now is the perfect time to attend @ThingsExpo in Silicon Valley. Learn what is going on, contribute to the discussions, and ensure that your enterprise is as "IoT-Ready" as it can be! Internet of @ThingsExpo, taking place Nov 3-5, 2015, at the Santa Clara Convention Center in Santa Clara, CA, is co-located with 17th Cloud Expo and will feature technical sessions from a rock star conference faculty and the leading industry players in the world. The Internet of Things (IoT) is the most profound change in personal an...
The security devil is always in the details of the attack: the ones you've endured, the ones you prepare yourself to fend off, and the ones that, you fear, will catch you completely unaware and defenseless. The Internet of Things (IoT) is nothing if not an endless proliferation of details. It's the vision of a world in which continuous Internet connectivity and addressability is embedded into a growing range of human artifacts, into the natural world, and even into our smartphones, appliances, and physical persons. In the IoT vision, every new "thing" - sensor, actuator, data source, data con...
SYS-CON Events announced today that the "First Containers & Microservices Conference" will take place June 9-11, 2015, at the Javits Center in New York City. The “Second Containers & Microservices Conference” will take place November 3-5, 2015, at Santa Clara Convention Center, Santa Clara, CA. Containers and microservices have become topics of intense interest throughout the cloud developer and enterprise IT communities.
Buzzword alert: Microservices and IoT at a DevOps conference? What could possibly go wrong? In this Power Panel at DevOps Summit, moderated by Jason Bloomberg, the leading expert on architecting agility for the enterprise and president of Intellyx, panelists will peel away the buzz and discuss the important architectural principles behind implementing IoT solutions for the enterprise. As remote IoT devices and sensors become increasingly intelligent, they become part of our distributed cloud environment, and we must architect and code accordingly. At the very least, you'll have no problem fil...
IoT is still a vague buzzword for many people. In his session at @ThingsExpo, Mike Kavis, Vice President & Principal Cloud Architect at Cloud Technology Partners, discussed the business value of IoT that goes far beyond the general public's perception that IoT is all about wearables and home consumer services. He also discussed how IoT is perceived by investors and how venture capitalist access this space. Other topics discussed were barriers to success, what is new, what is old, and what the future may hold. Mike Kavis is Vice President & Principal Cloud Architect at Cloud Technology Pa...
Disruptive macro trends in technology are impacting and dramatically changing the "art of the possible" relative to supply chain management practices through the innovative use of IoT, cloud, machine learning and Big Data to enable connected ecosystems of engagement. Enterprise informatics can now move beyond point solutions that merely monitor the past and implement integrated enterprise fabrics that enable end-to-end supply chain visibility to improve customer service delivery and optimize supplier management. Learn about enterprise architecture strategies for designing connected systems tha...
There's Big Data, then there's really Big Data from the Internet of Things. IoT is evolving to include many data possibilities like new types of event, log and network data. The volumes are enormous, generating tens of billions of logs per day, which raise data challenges. Early IoT deployments are relying heavily on both the cloud and managed service providers to navigate these challenges. In her session at Big Data Expo®, Hannah Smalltree, Director at Treasure Data, discussed how IoT, Big Data and deployments are processing massive data volumes from wearables, utilities and other machines...
SYS-CON Events announced today that MetraTech, now part of Ericsson, has been named “Silver Sponsor” of SYS-CON's 16th International Cloud Expo®, which will take place on June 9–11, 2015, at the Javits Center in New York, NY. Ericsson is the driving force behind the Networked Society- a world leader in communications infrastructure, software and services. Some 40% of the world’s mobile traffic runs through networks Ericsson has supplied, serving more than 2.5 billion subscribers.