ANN ARBOR, MI-An ugly fight has been gathering over the proposed merger of Captec Net Lease Realty Inc. with Commercial Net Lease Realty Inc. The proposed merger requires the approval of a majority of the outstanding shares of Captec common stock at a special meeting Nov. 19.

Phillip Goldstein, portfolio manager of Opportunity Partners L.P. of New York, which owns more than 369,000 shares in the company, is urging stockholders to vote against the merger, claiming Captec’s CEO is giving out misinformation and pocketing money on thedeal.

Captec, which invests in long-term net-leased restaurant and retail properties, has said that as a result of the merger: CNLR will acquire all of Captec’s outstanding shares for a combination of cash and stock for approximately $124 million, based on a value of $13.05 per share of Captec common stock. The stock portion is expected to be tax-free to Captec stockholders and the transaction is expected to be completed during the fourth quarter.

CNLR will have an enhanced portfolio of more than 377 properties in 40 states. After the merger, CNLR will have total gross leaseable area of approximately 7 million sf — approximately seven times Captec’s current total gross leaseable area.

CNLR’s diversified tenant base will become even more diverse with 96 tenants in 27 different retail lines of trade.

However, Goldstein disagrees.

“We believe the proposed merger is unfair to stockholders primarily because it includes a provision for management to acquire certain assets of Captec for less than their stated value,” Goldstein said in a proxy statement Oct. 24. “We believe that the assets in question may be worth more than $2 dollars per share in excess of the price that management has agreed to pay for them.”

Goldstein says if the merger is not approved, “it will demonstrate that stockholders are dissatisfied with the level of oversight that the incumbent board of directors has exercised.”

He says instead of the merger, the company should consider either liquidation or a restructured merger with CNLR or another company, but with the excluded assets being placed in a liquidating trust.

In response to Goldstein’s claims, Captec board secretary Edward Ptaszek wrote a letter to stockholders claiming Goldstein has “unleashed yet another baseless and vicious attack.”

“Goldstein is an amateur stockholder dissident who has no experience runningor selling a public company,” Ptaszek says. “We believe Goldstein has no interest in creating long-term value and you should not trust him.”

Ptaszek says Goldstein’s two options have been reviewed and rejected by the board of directors.

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