Cole Credit has declined American Realty's buyout offer stating that their bid undervalued the company and also entails 'unsustainable' debts. Instead, Cole Credit purchased its sponsor, Cole Holdings, Saturday, April 6.
American Realty had initially offered to buy 100 percent of Cole Credit's outstanding common shares for around $12 per share or 0.80 units of its own stock for each Cole Credit share. The total value of the deal including debt would amount to around $9 billion. However, it revised its buyout plan and increased the bid to $6.7 billion, also guaranteeing a 60 percent cash payout. The revised deal rounded off to around $9.7 billion including debts.
A committee at Cole Credit analyzed the buyout offer of American Realty and concluded that their new offer would prove unprofitable for the company as their shares would sell at a discount of 21 percent. In addition, the 60 percent cash guarantee deal would lead to an $8 billion debt for American Realty.
"Substantial additional cash would be required for American Realty to meet its guarantee. How can ARCP bid to acquire a company with funding it does not have?"Cole Credit said to Businessweek.
Apparently, the Cole Credit committee met more than 60 times in the past few months to discuss ARCP's offer. The board finally concluded that the Cole Holdings plan was the best option, reports Financial Times.
After refusing the deal, Cole Credit announced that it had completed the acquisition of its sponsor, Cole Holdings. Cole Credit already had plans to buy the company, form a separate new entity and list itself on the New York Stock Exchange. The company will go public by June, reports Bloomberg.
"We are pleased to complete the acquisition of Cole Holdings, which provides our stockholders with additional growth potential and increased access to capital," Leonard Wood, chairman of the special committee of Cole Credit's board, said in a statement.
The Cole Holdings acquisition plan also had its share of controversy. Shareholders of Cole Credit filed a lawsuit against the company stating that the plan was being given a "thumbs up" without votes of stockholders. However, the company waved it off saying that the lawsuit was "without any merit". Details and proceedings of the lawsuit are unknown.
