Diversified real estate investment trust W. P. Carey Inc. said its board approved a definitive stock-for-stock agreement to buy Corporate Property Associates 17 - Global Inc., its publicly held nontraded REIT unit, in a deal valued at approximately $6 billion.
Under the deal, each Corporate Property Associates share will be exchanged for 0.160 W. P. Carey share, reflecting a value of $10.72 per share based on W. P. Carey's closing share price of $67.03 on June 15.
Following the closing of the deal, W. P. Carey's pro forma equity market capitalization is expected to total about $11 billion with an enterprise value of approximately $17 billion.
The deal, subject to the approval of W. P. Carey and Corporate Property Associates shareholders, is slated to close on or around Dec. 31. Corporate Property Associates intends to actively solicit alternative proposals during a 30-day go-shop period that expires July 18.
Both companies have agreed that if the merger is terminated because one of them breaches any of their representations, warranties or agreements, they will pay the other party's out-of-pocket expenses. If the board of Corporate Property Associates changes or withdraws its recommendation or approves a competing transaction, the REIT will pay W. P. Carey a $114.0 million termination fee, which can be reduced to $38.0 million if the superior transaction is entered into as part of the go-shop period.
W. P. Carey said the transaction is expected to further simplify its business, add a high-quality diversified portfolio of net-lease assets in line with its existing portfolio, increase its size, scale and market prominence significantly and enhance its overall credit profile while maintaining its BBB and Baa2 ratings.
Jason Fox, W. P. Carey's CEO, said in a news release, "This transaction simplifies our business and effectively transforms W. P. Carey into a pure-play net lease REIT with earnings derived almost entirely from higher-multiple lease revenues."
J.P. Morgan Securities LLC is serving as lead financial adviser to W. P. Carey with Barclays Capital Inc. acting as co-financial adviser and DLA Piper LLP (US) as legal adviser.
Morgan Stanley & Co. LLC is acting as financial adviser and Pepper Hamilton LLP is acting as legal adviser to the Corporate Property Associates special committee. Clifford Chance US LLP is serving as Corporate Property Associates' legal adviser.