NEW YORK CITY—American Realty Capital Properties Inc. and RCS Capital Corp. said Thursday they have settled their dispute over RCS' cancellation of its purchase of Cole Capital. ARCP is receiving $60 million from RCAP in order to terminate the Sept. 30 purchase agreement for RCAP to acquire Cole Capital Partners LLC and Cole Capital Advisors Inc. from ARCP for at least $700 million in cash, stock and assumed debt.
The settlement resolves a lawsuit filed by ARCP in the Delaware Court of Chancery after RCAP canceled the Cole Capital deal early last month; ARCP is dismissing that lawsuit with prejudice. As part of the settlement, ARCP and RCAP have also agreed to terminate any agreements, arrangements or understandings related to the Cole Capital sale, which RCAP canceled after ARCP reported accounting irregularities in quarterly financial results.
The independent members of ARCP's board have retained Morgan Stanley and Citigroup Global Markets to evaluate possible long-term alternatives for Cole Capital. The two financial services firms also assisted in negotiating the settlement between ARCP and RCAP.
ARCP CEO David S. Kay calls the settlement “a positive outcome that serves the best interests of ARCP shareholders and our broader business, including our investment in Cole Capital. Our immediate plan is to stabilize Cole Capital, which we continue to believe is a valuable business, as we focus on creating long-term value and strengthening ARCP's position as the leading company in the net lease REIT industry.”
Saying that the settlement was "in the best interests of RCS Capital stakeholders," RCAP CEO Michael Weil adds, "We believe the negotiation of a fixed-cost settlement clearly outweighs the potential expense and distraction of a drawn-out litigation process. We continue to see progress across our entire industry-leading platform, including the reinstatement of a number of selling agreements within our wholesale business.”
Had the Cole Capital sale to RCAP gone through, it would have given ARCP a simpler business model and a focus solely on net lease. For RCAP, it would have meant an increase in assets under management and the addition of seven Cole Capital investment programs that would have bolstered its presence in the net lease sector.
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