Microsoft Cloud Authors: Elizabeth White, Yeshim Deniz, Serafima Al, Janakiram MSV, John Katrick

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
Poor data quality and analytics drive down business value. In fact, Gartner estimated that the average financial impact of poor data quality on organizations is $9.7 million per year. But bad data is much more than a cost center. By eroding trust in information, analytics and the business decisions based on these, it is a serious impediment to digital transformation.
The standardization of container runtimes and images has sparked the creation of an almost overwhelming number of new open source projects that build on and otherwise work with these specifications. Of course, there's Kubernetes, which orchestrates and manages collections of containers. It was one of the first and best-known examples of projects that make containers truly useful for production use. However, more recently, the container ecosystem has truly exploded. A service mesh like Istio addr...
Predicting the future has never been more challenging - not because of the lack of data but because of the flood of ungoverned and risk laden information. Microsoft states that 2.5 exabytes of data are created every day. Expectations and reliance on data are being pushed to the limits, as demands around hybrid options continue to grow.
Business professionals no longer wonder if they'll migrate to the cloud; it's now a matter of when. The cloud environment has proved to be a major force in transitioning to an agile business model that enables quick decisions and fast implementation that solidify customer relationships. And when the cloud is combined with the power of cognitive computing, it drives innovation and transformation that achieves astounding competitive advantage.
As IoT continues to increase momentum, so does the associated risk. Secure Device Lifecycle Management (DLM) is ranked as one of the most important technology areas of IoT. Driving this trend is the realization that secure support for IoT devices provides companies the ability to deliver high-quality, reliable, secure offerings faster, create new revenue streams, and reduce support costs, all while building a competitive advantage in their markets. In this session, we will use customer use cases...
Digital Transformation: Preparing Cloud & IoT Security for the Age of Artificial Intelligence. As automation and artificial intelligence (AI) power solution development and delivery, many businesses need to build backend cloud capabilities. Well-poised organizations, marketing smart devices with AI and BlockChain capabilities prepare to refine compliance and regulatory capabilities in 2018. Volumes of health, financial, technical and privacy data, along with tightening compliance requirements by...
The IoT Will Grow: In what might be the most obvious prediction of the decade, the IoT will continue to expand next year, with more and more devices coming online every single day. What isn’t so obvious about this prediction: where that growth will occur. The retail, healthcare, and industrial/supply chain industries will likely see the greatest growth. Forrester Research has predicted the IoT will become “the backbone” of customer value as it continues to grow. It is no surprise that retail is ...
Andrew Keys is Co-Founder of ConsenSys Enterprise. He comes to ConsenSys Enterprise with capital markets, technology and entrepreneurial experience. Previously, he worked for UBS investment bank in equities analysis. Later, he was responsible for the creation and distribution of life settlement products to hedge funds and investment banks. After, he co-founded a revenue cycle management company where he learned about Bitcoin and eventually Ethereal. Andrew's role at ConsenSys Enterprise is a mul...
The best way to leverage your Cloud Expo presence as a sponsor and exhibitor is to plan your news announcements around our events. The press covering Cloud Expo and @ThingsExpo will have access to these releases and will amplify your news announcements. More than two dozen Cloud companies either set deals at our shows or have announced their mergers and acquisitions at Cloud Expo. Product announcements during our show provide your company with the most reach through our targeted audiences.
DevOpsSummit New York 2018, colocated with CloudEXPO | DXWorldEXPO New York 2018 will be held November 11-13, 2018, in New York City. Digital Transformation (DX) is a major focus with the introduction of DXWorldEXPO within the program. Successful transformation requires a laser focus on being data-driven and on using all the tools available that enable transformation if they plan to survive over the long term. A total of 88% of Fortune 500 companies from a generation ago are now out of bus...
With 10 simultaneous tracks, keynotes, general sessions and targeted breakout classes, @CloudEXPO and DXWorldEXPO are two of the most important technology events of the year. Since its launch over eight years ago, @CloudEXPO and DXWorldEXPO have presented a rock star faculty as well as showcased hundreds of sponsors and exhibitors! In this blog post, we provide 7 tips on how, as part of our world-class faculty, you can deliver one of the most popular sessions at our events. But before reading...
DXWorldEXPO LLC announced today that "Miami Blockchain Event by FinTechEXPO" has announced that its Call for Papers is now open. The two-day event will present 20 top Blockchain experts. All speaking inquiries which covers the following information can be submitted by email to [email protected] Financial enterprises in New York City, London, Singapore, and other world financial capitals are embracing a new generation of smart, automated FinTech that eliminates many cumbersome, slow, and expe...
Cloud Expo | DXWorld Expo have announced the conference tracks for Cloud Expo 2018. Cloud Expo will be held June 5-7, 2018, at the Javits Center in New York City, and November 6-8, 2018, at the Santa Clara Convention Center, Santa Clara, CA. Digital Transformation (DX) is a major focus with the introduction of DX Expo within the program. Successful transformation requires a laser focus on being data-driven and on using all the tools available that enable transformation if they plan to survive ov...
DXWordEXPO New York 2018, colocated with CloudEXPO New York 2018 will be held November 11-13, 2018, in New York City and will bring together Cloud Computing, FinTech and Blockchain, Digital Transformation, Big Data, Internet of Things, DevOps, AI, Machine Learning and WebRTC to one location.
DXWorldEXPO LLC announced today that ICOHOLDER named "Media Sponsor" of Miami Blockchain Event by FinTechEXPO. ICOHOLDER give you detailed information and help the community to invest in the trusty projects. Miami Blockchain Event by FinTechEXPO has opened its Call for Papers. The two-day event will present 20 top Blockchain experts. All speaking inquiries which covers the following information can be submitted by email to [email protected] Miami Blockchain Event by FinTechEXPO also offers s...
DXWorldEXPO | CloudEXPO are the world's most influential, independent events where Cloud Computing was coined and where technology buyers and vendors meet to experience and discuss the big picture of Digital Transformation and all of the strategies, tactics, and tools they need to realize their goals. Sponsors of DXWorldEXPO | CloudEXPO benefit from unmatched branding, profile building and lead generation opportunities.
Dion Hinchcliffe is an internationally recognized digital expert, bestselling book author, frequent keynote speaker, analyst, futurist, and transformation expert based in Washington, DC. He is currently Chief Strategy Officer at the industry-leading digital strategy and online community solutions firm, 7Summits.
Widespread fragmentation is stalling the growth of the IIoT and making it difficult for partners to work together. The number of software platforms, apps, hardware and connectivity standards is creating paralysis among businesses that are afraid of being locked into a solution. EdgeX Foundry is unifying the community around a common IoT edge framework and an ecosystem of interoperable components.
Digital Transformation and Disruption, Amazon Style - What You Can Learn. Chris Kocher is a co-founder of Grey Heron, a management and strategic marketing consulting firm. He has 25+ years in both strategic and hands-on operating experience helping executives and investors build revenues and shareholder value. He has consulted with over 130 companies on innovating with new business models, product strategies and monetization. Chris has held management positions at HP and Symantec in addition to ...
Cloud-enabled transformation has evolved from cost saving measure to business innovation strategy -- one that combines the cloud with cognitive capabilities to drive market disruption. Learn how you can achieve the insight and agility you need to gain a competitive advantage. Industry-acclaimed CTO and cloud expert, Shankar Kalyana presents. Only the most exceptional IBMers are appointed with the rare distinction of IBM Fellow, the highest technical honor in the company. Shankar has also receive...