Cole Credit shareholders seek to block internal merger

The battle over Cole III has taken a new twist, as shareholders sued to block the REIT's internal merger. Meanwhile, suitor American Realty Capital waits in the wings.
JUN 20, 2013
Shareholders of Cole Credit Property Trust III asked a Maryland judge to block an internal merger involving a company owned by its chairman while it weighs a $6.7 billion buyout offer from American Realty Capital Properties Inc. (ARCP) The shareholders claim that Christopher Cole, chairman of Cole Credit, is seeking to merge, without a shareholder vote, the nontraded real estate investment trust with Cole Holdings Corp., the trust's sponsor, which he fully owns. The request was made yesterday in a filing in Maryland state court in Baltimore. “The only winner if the merger is not voted on by shareholders and is consummated is Christopher Cole,” John Isbister, a lawyer for the shareholders, wrote in the filing. “The only loser if the merger is voted on by the shareholders and rejected is Christopher Cole. Cole Holdings, a manager of a more than 2,000 U.S. commercial buildings, on March 6 agreed to be acquired by Cole Credit, which will make an initial payment of $20 million in cash and 10.7 million shares of its stock for the company, which manages more than $12 billion for more than 160,000 individual investors, the firms said in a statement announcing the deal. The combined company will be called Cole Real Estate Investments Inc. and will seek to list its shares on the New York Stock Exchange. The deal is expected to be completed in the second quarter. Cole Credit Property Trust III believes the investor lawsuit is ''entirely without merit'' and it intends to defend itself vigorously, according to an e-mailed statement. Cole Credit, the owner of more than 900 mostly single- tenant office, retail and industrial properties, rejected a March 20 bid from American Realty, which offered $12 a share, saying it undervalued the company. American Realty revised its bid to include the acquisition of Cole Holdings and take into account property data suggesting increased value for Cole Credit, the New York-based company said March 27 in a letter to Cole Credit's board. The new bid is valued at about $9.7 billion, including the assumption of debt. Under the stock-payment plan, American Realty guaranteed to pay at least $13.59 for each Cole Credit share. John Bacon, a spokesman for Cole Holdings, didn't immediately respond to an e-mail on March 28 seeking comment on the filing. Tony DeFazio, an American Realty spokesman, said he couldn't he couldn't comment on it immediately. -- Bloomberg News --

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