Spirit Realty (SRC), CCPT II Enter Merger Agreement
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Spirit Realty Capital, Inc. (NYSE: SRC) and Cole Credit Property Trust II have unanimously approved a definitive agreement to merge their companies to create the second largest publicly traded triple-net-lease REIT in the United States with a pro forma enterprise value of approximately $7.1 billion.
The combined company, which will retain the Spirit Realty name and trade on the New York Stock Exchange under the ticker symbol “SRC,” will own or have an interest in 2,012 properties in 48 states. It will have a significantly enhanced scale and scope, a more broadly diversified portfolio of high-quality real estate assets and enhanced access to capital. The current management team of Spirit Realty will lead the combined company. The transaction is expected to close in the third quarter of 2013.
Pursuant to the terms of the merger agreement, Spirit Realty shareholders will receive a fixed exchange ratio of 1.9048 CCPT II shares for each share of Spirit Realty common stock owned (equates to 0.525 Spirit Realty shares for each share of CCPT II). The combined company will immediately list its common shares on the NYSE and will trade under Spirit Realty’s existing ticker SRC. Based on Spirit Realty’s closing price of $17.82 per share on January 18, 2013, the exchange ratio implies a value of $9.36 per CCPT II share and reflects a positive cumulative total return including dividends of 20-42% for shareholders of CCPT II, depending on the shareholder holding period. When compared to the volume weighted average price of Spirit’s share price from the date of its inclusion in the Russell 2000 Index through the closing price on January 18, 2013, which was $17.66, the exchange ratio implies a value of $9.27 per CCPT II share. Based on the volume weighted average price of Spirit Realty over the last 20 trading days of $17.47 per share, the exchange ratio implies a value of $9.17 per CCPT II share. Following the close, CCPT II shareholders are expected to own approximately 56% and Spirit Realty shareholders approximately 44% of the common shares of the combined REIT. Spirit Realty’s largest shareholders, Macquarie Capital and TPG-Axon, who together own approximately 15% of Spirit Realty, have executed agreements that state their intention to vote in favor of the transaction.
The transaction is expected to be slightly accretive to Spirit Realty’s funds from operations per share following closing, pending completion of the company’s purchase accounting analysis. Shareholders can expect to continue to see, without disruption, a dividend distribution from their investment. CCPT II will pay no internalization fee or transaction fees to Cole.
The combined company will continue to employ Spirit Realty’s proven credit analysis and asset management skill set. The combined company will have a nine-member board of directors, seven of whom will be existing board members of Spirit Realty and two who will be representatives from CCPT II.
The completion of the transaction is subject to the receipt of approval of the majority of shares outstanding of Spirit Realty and CCPT II and customary regulatory approvals and closing conditions. A joint proxy statement/prospectus will be filed on Form S-4 with the Securities and Exchange Commission, which will describe the proposed merger.
Barclays served as financial advisor to Spirit Realty, and Latham & Watkins LLP served as legal advisor to Spirit Realty.
Morgan Stanley and UBS Investment Bank served as financial advisors to CCPT II, and Goodwin Procter LLP served as legal advisor to CCPT II. Gleacher & Company served as financial advisor to the Special Committee of CCPT II and Ropes & Gray LLP served as legal advisor to the Special Committee of CCPT II.
The combined company, which will retain the Spirit Realty name and trade on the New York Stock Exchange under the ticker symbol “SRC,” will own or have an interest in 2,012 properties in 48 states. It will have a significantly enhanced scale and scope, a more broadly diversified portfolio of high-quality real estate assets and enhanced access to capital. The current management team of Spirit Realty will lead the combined company. The transaction is expected to close in the third quarter of 2013.
Pursuant to the terms of the merger agreement, Spirit Realty shareholders will receive a fixed exchange ratio of 1.9048 CCPT II shares for each share of Spirit Realty common stock owned (equates to 0.525 Spirit Realty shares for each share of CCPT II). The combined company will immediately list its common shares on the NYSE and will trade under Spirit Realty’s existing ticker SRC. Based on Spirit Realty’s closing price of $17.82 per share on January 18, 2013, the exchange ratio implies a value of $9.36 per CCPT II share and reflects a positive cumulative total return including dividends of 20-42% for shareholders of CCPT II, depending on the shareholder holding period. When compared to the volume weighted average price of Spirit’s share price from the date of its inclusion in the Russell 2000 Index through the closing price on January 18, 2013, which was $17.66, the exchange ratio implies a value of $9.27 per CCPT II share. Based on the volume weighted average price of Spirit Realty over the last 20 trading days of $17.47 per share, the exchange ratio implies a value of $9.17 per CCPT II share. Following the close, CCPT II shareholders are expected to own approximately 56% and Spirit Realty shareholders approximately 44% of the common shares of the combined REIT. Spirit Realty’s largest shareholders, Macquarie Capital and TPG-Axon, who together own approximately 15% of Spirit Realty, have executed agreements that state their intention to vote in favor of the transaction.
The transaction is expected to be slightly accretive to Spirit Realty’s funds from operations per share following closing, pending completion of the company’s purchase accounting analysis. Shareholders can expect to continue to see, without disruption, a dividend distribution from their investment. CCPT II will pay no internalization fee or transaction fees to Cole.
The combined company will continue to employ Spirit Realty’s proven credit analysis and asset management skill set. The combined company will have a nine-member board of directors, seven of whom will be existing board members of Spirit Realty and two who will be representatives from CCPT II.
The completion of the transaction is subject to the receipt of approval of the majority of shares outstanding of Spirit Realty and CCPT II and customary regulatory approvals and closing conditions. A joint proxy statement/prospectus will be filed on Form S-4 with the Securities and Exchange Commission, which will describe the proposed merger.
Barclays served as financial advisor to Spirit Realty, and Latham & Watkins LLP served as legal advisor to Spirit Realty.
Morgan Stanley and UBS Investment Bank served as financial advisors to CCPT II, and Goodwin Procter LLP served as legal advisor to CCPT II. Gleacher & Company served as financial advisor to the Special Committee of CCPT II and Ropes & Gray LLP served as legal advisor to the Special Committee of CCPT II.
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