Lewis says Realty Income
is aiming to diversify
its portfolio.

NEW YORK CITY-In one of the biggest M&A transactions of the year, Escondido, CA Realty Income Corp. has signed a definitive agreement to acquire REIT American Realty Capital Trust, Inc. in a transaction valued at $2.95 billion, according to a joint statement issued by both companies early this morning. The deal, expected to close by the end of the year or early 2013, is being driven by Realty Income’s strategy of increasing revenue generated by investment grade tenants and further diversifying its portfolio outside of the retail industry, CEO Tom A. Lewis said in a prepared statement.

The acquisition will be financed by Realty Income directly issuing $1.9 billion of its common stock to ARCT shareholders, the assumption of approximately $526 million of debt, and the immediate repayment of approximately $574 million of outstanding debt and transaction expenses.

Lewis says the transaction is immediately accretive and is expected to generate approximately $0.20-0.22 per share in addition FFO annual, and upon closing, is expected to increase annualized dividends to shareholders by approximately $0.13 per hare to an annualized rate of approximately $1.94 per share.

ARCT –which listed on the NASDAQ in the spring –focuses on net-leased pharmacies, banks, restaurants and convenience stores in high-traffic locations to high credit quality tenants. Approximately 75% of the rental revenue added in the acquisition transaction will be generated by investment-grade tenants including FedEx, Walgreens, CVS, the GSA, Dollar General, Express Scripts, PNC Bank and Whirlpool, according to Realty Income.

Nicholas S. Schorsch, chairman of ARCT, says Realty Income has an “extraordinary track record” and “strong overall” performance. “This transaction will institutionalize the notion of durable, defensive dividends for our shareholders by allowing them to become owners on a very favorable basis of the largest, and I believe, now the best, publicly-traded net leased real estate company, period.”