NEW YORK, Dec. 6, 2012 /PRNewswire/ -- American Realty
Capital Trust, Inc., (NASDAQ: ARCT) ("ARCT" or the "Company") today
announced that it has filed with the Securities and Exchange
Commission ("SEC"), and has commenced mailing to all ARCT
stockholders, its definitive proxy materials regarding the
previously announced merger with Realty Income Corporation (NYSE:
O).
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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, local time 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.
ARCT's board of directors has unanimously approved the Realty
Income merger and recommends that all ARCT stockholders vote "FOR"
the proposal to approve the merger on the WHITE proxy card.
Approval of the merger requires the affirmative vote of the holders
of a majority of the outstanding shares of the Company's common
stock entitled to vote at the Special Meeting.
Stockholders are encouraged to read the Company's definitive
proxy materials in their entirety as they provide, among other
things, a detailed discussion of the process that led to the merger
agreement and the reasons behind the board of directors' unanimous
recommendation that stockholders vote "FOR" the proposal to approve
the merger.
ARCT today issued the following letter to stockholders:
December 6, 2012
Dear Fellow Stockholder,
You will soon receive proxy materials from American Realty
Capital Trust, Inc. ("ARCT") regarding the Special Meeting of ARCT
Stockholders scheduled for January
16, 2013. At the Special Meeting you will be asked to
consider, and vote upon, a proposal to approve the merger and the
other transactions contemplated by the merger agreement providing
for the acquisition of ARCT by Realty Income Corporation.
ARCT stockholders of record as of the close of business on
December 6, 2012, are entitled to
notice of, and to vote at, the Special Meeting.
As detailed in the proxy materials and outlined below, your
board of directors has concluded that the proposed merger with
Realty Income is in the best interests of the Company and its
stockholders and unanimously recommends you vote FOR the proposal
to approve the merger. After thorough deliberation by your
board of directors, with the assistance of the Company's
independent financial and legal advisors, the Company has
determined that a sale to Realty Income is the best way to continue
delivering value to ARCT stockholders.
We urge you to vote by telephone or via the Internet by
following instructions on your WHITE proxy card, or please sign,
date and return the enclosed WHITE proxy card today using the
postage-paid envelope provided. Your vote is very
important. Your board of directors recommends that
stockholders vote today FOR the proposal to approve the merger with
Realty Income. A failure to vote will have the same
effect as a vote AGAINST the proposal to approve the merger and the
other transactions contemplated by the merger agreement.
YOUR BOARD OF DIRECTORS
UNANIMOUSLY BELIEVES THAT THE PROPOSED ACQUISITION BY REALTY INCOME
IS IN THE BEST INTERESTS OF ARCT AND ITS STOCKHOLDERS
In making its recommendation, your board took into account a
variety of factors described in the definitive proxy statement,
including ARCT's pre-announcement and historical stock prices,
forecasts of ARCT's future financial performance prepared by ARCT's
management, and the financial analyses performed by Goldman, Sachs
& Co., the Company's financial advisor, and summarized in the
proxy statement. Your board also thoroughly considered
various strategic alternatives, including remaining a stand-alone
company, leveraged recapitalizations and other strategic
transactions. In evaluating these other scenarios, your board
determined that none of these alternatives was likely to lead to
greater stockholder value than the Realty Income merger.
The merger with Realty Income provides a number of compelling
benefits to ARCT stockholders:
- ARCT Stockholders Will Own Shares In Realty Income, the
Best-Performing Net Lease REIT Over a 40-Year Timeframe.
As a result of the merger, you will receive common stock of one of
the most attractive publicly traded net lease REITs in the
sector. Realty Income has paid 509 consecutive monthly
dividends since 1970, and it has increased its monthly dividend 68
times since its listing on the New York Stock Exchange in
1994. During that time, its annual dividend has increased
from $0.90 per share to $1.82[1], and there is potential for a
dividend increase upon the closing of this transaction.
Additionally, since Realty Income's listing on the NYSE in 1994,
the compounded annual return to stockholders has been 17.8%, which
is more than 5.9% points over the Dow Jones Industrial Average,
Standard & Poor's 500, NASDAQ and FTSE NAREIT Index for the
same period.[2]
"For ARCT shareholders, the benefits include a decline in cost of
and a greater access to capital, overhead savings, and partnering
with the best in class management team with a track record of
producing attractive shareholder returns and dividend
growth."
- JMP Securities research report, "Merger
Overshadows 3Q Report; Maintain MP" - November 2, 2012.*
- The Combined Company Should Produce Substantial Earnings
Growth, Driving Additional Stockholder Value. The
combined company, which will be financially stronger than its
competitors and have a lower cost of capital, will have a distinct
advantage in the net lease sector and be poised to grow earnings
while increasing dividends. The combined company's size and
balance sheet strength will further facilitate the execution of
large transactions through improved access to capital, and
substantially enhance the combined company's ability to generate
significant transaction volumes in the relatively fragmented net
lease real estate market. As a result of the merger, ARCT
stockholders stand to benefit from higher risk adjusted returns due
to the greater stability and diversity of the combined property
portfolio.
While there are short-term tradeoffs for ARCT stockholders with
respect to the dividend, the Company's Board and management
strongly believe that the reduction in yield is far outweighed by
the potential for growth and value creation in the combined
company. ARCT's Board and management are confident in the
future prospects of the combined company. ARCT's management
will have an anticipated collective ownership of approximately
$45 million in Realty Income stock
following the close of the transaction, so their interests are
firmly aligned with those of ARCT
stockholders.
"In all, through both a major acquisition like ARCT and
the consistent level of acquisition activity on a quarterly basis,
Realty Income is poised for substantial growth in our
view."
- RBC Capital Markets research report, "3Q Earnings
Review: Operations, Acqs Strong; Raising 12/13 Est, Introducing
'14" - October 29, 2012.*
- Realty Income is Valuing ARCT's Assets at a Price
Significantly Higher Than What ARCT Paid for Them Originally, and
the Multiple Paid is at the High End of Similar Net Lease
Transactions.
- Low capitalization rate: On September 5, 2012, the implied offer value of
$12.21 per share of ARCT common stock
implied a weighted average capitalization rate for ARCT's assets of
6.1%, or 5.9% based on current cash rents. This is
significantly below the weighted average capitalization rate of
8.2% at which ARCT aggregated its portfolio of assets. 58% of
ARCT's assets (by acquisition volume) were purchased in 2011 and
are already being sold at this much lower cap rate.
- High multiple relative to precedent transactions: At
announcement, the transaction exchange ratio implied a forward FFO
multiple of 14.4x for ARCT, which is at the high end of similar net
lease public REIT sale transactions.[3]
- Expected Dividend Increase. Given the positive
impact the transaction is expected to have on operating results,
Realty Income anticipates that, upon closing, it will increase its
dividend by approximately $0.13 per
share, or 7.1%.
MERGER WITH REALTY INCOME IS BEST
OPTION TO CREATE VALUE FOR ARCT STOCKHOLDERS; ARCT HAS
DEMONSTRATED ITS CONTINUING COMMITMENT TO MAXIMIZING STOCKHOLDER
VALUE
The decision by ARCT's board of directors to enter into a
definitive agreement with Realty Income was made after the board
had undertaken an extensive and thorough evaluation of strategic
alternatives beginning in April
2011. Through this process, with the assistance of
Goldman Sachs, a number of options were evaluated thoroughly,
including transforming ARCT into a publicly traded REIT.
- During the process of evaluating strategic alternatives, over
40 parties were initially contacted regarding their interest in
engaging in a strategic transaction with ARCT. Of the parties
contacted, 18 (including nine REITs) executed confidentiality
agreements and were provided access to ARCT's online data
room. While six of these parties submitted non−binding
indications of interest, none of the proposals valued ARCT at or
above its initial public offering price of $10.00 per share, and several proposals related
only to the acquisition of a portion of the ARCT portfolio.
- After reviewing the various alternatives, the ARCT board
determined that none would result in a transaction that would
maximize stockholder value. After careful deliberation, the
board decided to list the Company on a national exchange, providing
stockholders with the option to take full liquidity or to continue
to own ARCT shares and benefit from the Company's anticipated
growth and strong dividend. Accordingly, on March 1, 2012, ARCT internalized its management
at no cost to stockholders, listed its shares of common stock on
NASDAQ and commenced a self−tender offer for a portion of its
outstanding shares of common stock.
- In August 2012, ARCT was
approached by Realty Income to discuss a potential
transaction. The two parties proceeded with
negotiations. The resulting terms of the proposed merger
represent an offer that provides ARCT stockholders with greater
value than Realty Income's initial proposal received in February,
2012.
Consistent with its fiduciary duties, your board of directors
has reviewed and will review any and all bona fide proposals that
maximize stockholder value. The strategic alternatives
review and sale process resulted in no other credible offers.
No third party has contacted ARCT or Goldman Sachs regarding a
possible strategic transaction since the announcement of the merger
agreement with Realty Income. The ARCT board of directors
does not believe it likely that another party will make or accept
an offer to engage in a transaction with ARCT that would be more
favorable to ARCT and its stockholders than the merger with Realty
Income. Independent experts share the assessment of the
ARCT board of directors:
"In our view, O's deal for ARCT is an attractive one as it
has the lowest capital costs in the public markets and we don't see
better offers being out there for the enterprise."
- JP
Morgan research report, "3Q a Penny
Shy of Our Estimate on Lighter Revenue; Deal Volume as
Expected"
- 25 October 2012.*
THE PROPOSED MERGER WITH REALTY
INCOME ELIMINATES THE RISKS INHERENT IN A STAND-ALONE
STRATEGY
The Realty Income merger will remove significant risks to ARCT
stockholders. While ARCT believes that long-term fundamentals
should remain intact for the net lease REIT sector, the ability to
take advantage of opportunities in the sector could be challenged
by our access to capital markets, industry competition and tenant
concentration if ARCT were to remain an independent company. These
challenges would include:
- Access to Capital Markets. Like most net lease
REITs, our earnings and dividend growth depends in part on
acquisition activity funded through the capital markets. In a
worsening fiscal environment, ARCT's current sub-investment grade
credit rating would put the Company at a disadvantage in accessing
the capital markets. The combined company, however, is
expected to have an investment grade credit rating ensuring access
to multiple forms of capital that ARCT has not accessed as a public
company, mitigating debt financing risk and ensuring that ARCT is
well positioned to benefit from its external acquisition growth
opportunities compared to peers with higher capital costs.
- Tenant Concentration Risk. Currently, 64% of our
annualized base rents are derived from our top 15 tenants. The
combined company will have a decreased top 15 tenant concentration
of 42% and hence decreased reliance on rents from these top
tenants. As a result, the loss of any one important
tenant would have less of an impact on the combined company than on
the stand-alone company.
- Greater Economies of Scale. The combined
company should be able to achieve greater economies of scale than
stand-alone ARCT by taking advantage of Realty Income's operating
platform over a larger portfolio. Furthermore, the combined company
will be the largest public triple net lease enterprise by over two
times and will be well-positioned as a premier consolidator in the
net lease sector.
MAXIMIZE THE VALUE OF YOUR
INVESTMENT IN ARCT – VOTE "FOR" THE PROPOSED MERGER WITH REALTY
INCOME ON THE ENCLOSED PROXY CARD TODAY
Given the comprehensive process undertaken by your board and its
financial advisor, an evaluation of the Company's stand-alone plan,
and the other factors described in the proxy statement, ARCT's
board has unanimously determined that the Realty Income merger is
in the best interests of ARCT and its stockholders, and unanimously
recommends that ARCT stockholders vote FOR the proposed
merger.
YOUR VOTE IS IMPORTANT – PLEASE
VOTE FOR THE REALTY INCOME TRANSACTION TODAY
Your vote is extremely important, no matter how many shares you
own. The affirmative vote of holders of a majority of ARCT's
outstanding shares is required to approve the merger and the other
transactions contemplated by the merger agreement.
Please take a moment to vote FOR the proposal to approve the
merger today – by telephone, by Internet or by signing, dating and
returning the enclosed WHITE proxy card in the postage-paid
envelope provided.
If you have any questions or need assistance voting your shares,
please call the Company's proxy solicitor, D.F. King & Co., Inc., toll free at
1-800-714-3305.
Thank you for your support.
On Behalf of the Board of Directors,
/s/
Nicholas S. Schorsch
Chairman
* Permission to use quotations was neither sought nor
obtained.
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 to obtain regulatory
approvals for the transaction and the approval of the merger
agreement by the stockholders of both parties; 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] Annualized dividend amount reflects the December declared
dividend rate per share multiplied by twelve.
[2] Compound annual returns calculated weekly since Realty Income's
listing date. Data range adjusted for calculation from 4-Nov-1994 through 31-Aug-2012 to account for availability of
data. Assumes reinvestment of dividends (except for NASDAQ).
Past performance does not guarantee future performance and there
can be no assurance about Realty Income's future performance or its
comparative performance to the other indices in the future.
[3] Precedent transactions include Government Properties Trust /
Record Realty (23-Oct-2006), Trustreet Properties / General
Electric Capital Corporation (30-Oct-2006), Spirit Finance
Corporation / Investor Group led by Macquarie Bank (13-Mar-2007),
Capital Automotive REIT / DRA Advisors LLC (6-Sep2005), American
Financial Realty Trust / Gramercy Capital Corp (5-Nov-2007) and
Newkirk Realty Trust / Lexington Realty Trust (23-Jul-2006)
SOURCE American Realty Capital Trust, Inc.