American Realty Offers $5.7B to Create One of the Largest Public REITs

American Realty Capital Properties (NASDAQ:ARCP) made its offer to buy Cole Credit Property Trust III for $5.7 billion public on Wednesday in a move that would create the largest publicly-traded REIT in the net lease sector.

The deal carries a value of $12 a share in cash and stock, representing a premium of 20% to its original offer price of $10 a share. With the assumption of debt, the acquisition is valued at $9 billion.

Shares of American Realty ticked up about 1.5% to $14.17 in recent trade.

American Realty said it will increase its annual dividend by 2.2% to 93 cents if the deal closes, which means that CCPT III shareholders who select the stock consideration would receive an equivalent dividend of 74.4 cents, a 15% increase over CCPT’s current 65-cent dividend.

However, American Realty said it would need to reconsider its proposal if CCPT's proposed transaction of Cole Holdings closes. CCPT previously offered to buy real estate investment management company Cole Holdings for $20 million in cash. It plans to change its name to Cole Real Estate investments and is seeking to list on the New York Stock Exchange.

American Realty, which contends that its offer is superior to the Cole acquisition and better represents the interest of CCPT III shareholders, said it first approached the company regarding a merger before the Cole Holdings takeover was announced.

“We were surprised to not have received any response,” American Realty Chief Executive Nicholas Schorsch said in the letter. “We are prepared to devote all necessary resources to this transaction.”

The proposal, he said, has received unanimous support from the ARCP board of directors.

ARCP has engaged Barclays Capital (NYSE:BCS) and RCS Capital as its financial advisors as well as Proskauer Rose LLP and Weil, Gotshal & Manges LLP as its legal advisors.