Welcome!

Microsoft Cloud Authors: Pat Romanski, Srinivasan Sundara Rajan, Glenn Rossman, Janakiram MSV, Steven Mandel

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
DevOps at Cloud Expo, taking place Nov 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA, is co-located with 19th Cloud Expo and will feature technical sessions from a rock star conference faculty and the leading industry players in the world. The widespread success of cloud computing is driving the DevOps revolution in enterprise IT. Now as never before, development teams must communicate and collaborate in a dynamic, 24/7/365 environment. There is no time to wait for long dev...
IoT offers a value of almost $4 trillion to the manufacturing industry through platforms that can improve margins, optimize operations & drive high performance work teams. By using IoT technologies as a foundation, manufacturing customers are integrating worker safety with manufacturing systems, driving deep collaboration and utilizing analytics to exponentially increased per-unit margins. However, as Benoit Lheureux, the VP for Research at Gartner points out, “IoT project implementers often ...
Why do your mobile transformations need to happen today? Mobile is the strategy that enterprise transformation centers on to drive customer engagement. In his general session at @ThingsExpo, Roger Woods, Director, Mobile Product & Strategy – Adobe Marketing Cloud, covered key IoT and mobile trends that are forcing mobile transformation, key components of a solid mobile strategy and explored how brands are effectively driving mobile change throughout the enterprise.
SYS-CON Events announced today that Bsquare has been named “Silver Sponsor” of SYS-CON's @ThingsExpo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. For more than two decades, Bsquare has helped its customers extract business value from a broad array of physical assets by making them intelligent, connecting them, and using the data they generate to optimize business processes.
Businesses are struggling to manage the information flow and interactions between all of these new devices and things jumping on their network, and the apps and IT systems they control. The data businesses gather is only helpful if they can do something with it. In his session at @ThingsExpo, Chris Witeck, Principal Technology Strategist at Citrix, will discuss how different the impact of IoT will be for large businesses, expanding how IoT will allow large organizations to make their legacy ap...
Video experiences should be unique and exciting! But that doesn’t mean you need to patch all the pieces yourself. Users demand rich and engaging experiences and new ways to connect with you. But creating robust video applications at scale can be complicated, time-consuming and expensive. In his session at @ThingsExpo, Zohar Babin, Vice President of Platform, Ecosystem and Community at Kaltura, will discuss how VPaaS enables you to move fast, creating scalable video experiences that reach your ...
In his keynote at 18th Cloud Expo, Andrew Keys, Co-Founder of ConsenSys Enterprise, provided an overview of the evolution of the Internet and the Database and the future of their combination – the Blockchain. 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 sett...
In his session at @ThingsExpo, Kausik Sridharabalan, founder and CTO of Pulzze Systems, Inc., will focus on key challenges in building an Internet of Things solution infrastructure. He will shed light on efficient ways of defining interactions within IoT solutions, leading to cost and time reduction. He will also introduce ways to handle data and how one can develop IoT solutions that are lean, flexible and configurable, thus making IoT infrastructure agile and scalable.
In this strange new world where more and more power is drawn from business technology, companies are effectively straddling two paths on the road to innovation and transformation into digital enterprises. The first path is the heritage trail – with “legacy” technology forming the background. Here, extant technologies are transformed by core IT teams to provide more API-driven approaches. Legacy systems can restrict companies that are transitioning into digital enterprises. To truly become a lea...
Just over a week ago I received a long and loud sustained applause for a presentation I delivered at this year’s Cloud Expo in Santa Clara. I was extremely pleased with the turnout and had some very good conversations with many of the attendees. Over the next few days I had many more meaningful conversations and was not only happy with the results but also learned a few new things. Here is everything I learned in those three days distilled into three short points.
There are several IoTs: the Industrial Internet, Consumer Wearables, Wearables and Healthcare, Supply Chains, and the movement toward Smart Grids, Cities, Regions, and Nations. There are competing communications standards every step of the way, a bewildering array of sensors and devices, and an entire world of competing data analytics platforms. To some this appears to be chaos. In this power panel at @ThingsExpo, moderated by Conference Chair Roger Strukhoff, Bradley Holt, Developer Advocate a...
24Notion is full-service global creative digital marketing, technology and lifestyle agency that combines strategic ideas with customized tactical execution. With a broad understand of the art of traditional marketing, new media, communications and social influence, 24Notion uniquely understands how to connect your brand strategy with the right consumer. 24Notion ranked #12 on Corporate Social Responsibility - Book of List.
The vision of a connected smart home is becoming reality with the application of integrated wireless technologies in devices and appliances. The use of standardized and TCP/IP networked wireless technologies in line-powered and battery operated sensors and controls has led to the adoption of radios in the 2.4GHz band, including Wi-Fi, BT/BLE and 802.15.4 applied ZigBee and Thread. This is driving the need for robust wireless coexistence for multiple radios to ensure throughput performance and th...
SYS-CON Events announced today that SoftLayer, an IBM Company, has been named “Gold Sponsor” of SYS-CON's 18th Cloud Expo, which will take place on June 7-9, 2016, at the Javits Center in New York, New York. SoftLayer, an IBM Company, provides cloud infrastructure as a service from a growing number of data centers and network points of presence around the world. SoftLayer’s customers range from Web startups to global enterprises.
Major trends and emerging technologies – from virtual reality and IoT, to Big Data and algorithms – are helping organizations innovate in the digital era. However, to create real business value, IT must think beyond the ‘what’ of digital transformation to the ‘how’ to harness emerging trends, innovation and disruption. Architecture is the key that underpins and ties all these efforts together. In the digital age, it’s important to invest in architecture, extend the enterprise footprint to the cl...
If you had a chance to enter on the ground level of the largest e-commerce market in the world – would you? China is the world’s most populated country with the second largest economy and the world’s fastest growing market. It is estimated that by 2018 the Chinese market will be reaching over $30 billion in gaming revenue alone. Admittedly for a foreign company, doing business in China can be challenging. Often changing laws, administrative regulations and the often inscrutable Chinese Interne...
Information technology is an industry that has always experienced change, and the dramatic change sweeping across the industry today could not be truthfully described as the first time we've seen such widespread change impacting customer investments. However, the rate of the change, and the potential outcomes from today's digital transformation has the distinct potential to separate the industry into two camps: Organizations that see the change coming, embrace it, and successful leverage it; and...
Adobe is changing the world though digital experiences. Adobe helps customers develop and deliver high-impact experiences that differentiate brands, build loyalty, and drive revenue across every screen, including smartphones, computers, tablets and TVs. Adobe content solutions are used daily by millions of companies worldwide-from publishers and broadcasters, to enterprises, marketing agencies and household-name brands. Building on its established design leadership, Adobe enables customers not o...
Internet of @ThingsExpo, taking place November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA, is co-located with 19th 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 and enterprise IT since the creation of the Worldwide Web more than 20 years ago. All major researchers estimate there will be tens of billions devices - comp...
Cloud computing is being adopted in one form or another by 94% of enterprises today. Tens of billions of new devices are being connected to The Internet of Things. And Big Data is driving this bus. An exponential increase is expected in the amount of information being processed, managed, analyzed, and acted upon by enterprise IT. This amazing is not part of some distant future - it is happening today. One report shows a 650% increase in enterprise data by 2020. Other estimates are even higher....