Boston, MA 10/24/2013 (wallstreetpr) – The Cole Real Estate Investments Inc (NYSE:COLE) had recently announced a proposed merger which has sent its share prices shooting up. The company is in talks to merge with American Realty Capital in a deal which is valued at $11.2 billion.
This is seen to be a great step forward, and has been enthusiastically welcomed by the market, because of the fact that such a merger shall result in the largest net leases REIT in the country. The combined value of the companies’ shall be $21.5 billion. Under the deal, Cole will become a wholly owned subsidiary of ARCP.
However, the merger has only been approved by the Board of both the companies, and needs to be approved by the stockholders. The event shall mark the merger of two leading U.S. real estate companies. The merger is seen to benefit shareholders of Cole, as the deal has great upside equity potential, mostly because of the fact that, at this time, the industry is moving toward consolidating itself. The merger is said to provide immediate benefits in the form of economies, size, and the diversification both the companies have attained in their individual capacity.
However, ARCP is expected to gain much more form the deal than Cole, which is what is expected by the projected figures. ARCP’s net debt to EBITDA ration is expected to fall from 9.1x to 7.7x by the end of 2014. The merger is also expected to result in expenses synergies to the tune of $70 million, among other advantages.
The merger is poised to create benefits for both, as the investment ideologies adopted at both the companies are almost the same. Both the companies invariably focus on investment grade tenancy, long lease durations, a diversified tenant base, coupled with a mix of geography and property type. Such combined synergies shall benefit Cole more than if kept separate.