Sandell Opposes American Realty Capital Trust's Sale to Realty Income Corporation

NEW YORK, Oct. 19, 2012 /PRNewswire/ -- In response to Realty Income Corporation's proposed merger agreement with American Realty Capital Trust, Sandell Asset Management's Chief Executive Officer Thomas E. Sandell sent today the following letter to American Realty Capital Trust's Board of Directors:

Board of Directors 
American Realty Capital Trust, Inc. 
405 Park Avenue, 14th Floor 
New York, NY 10022 
Attn: William M. Kahane, Chief Executive Officer and President 

Gentlemen:

Sandell Asset Management Corp. is the beneficial owner of approximately 1.8% of the outstanding shares of American Realty Capital Trust, and we write to you today to convey our support of the views expressed by Luxor Capital Group earlier this week in opposing the proposed acquisition of ARCT by Realty Income Corporation.  We similarly intend to vote against the proposed merger on its current terms and will encourage our fellow stockholders to do likewise. 

ARCT has an outstanding real estate portfolio with long-term leases from primarily investment grade tenants, provides an excellent dividend yield and has outstanding growth prospects.  Based on a blend of several different valuation metrics, we believe ARCT to have a stand-alone value of $13.50 per share.  ARCT brings significant value to Realty Income, enhancing the diversification, occupancy rate, lease duration and tenant credit quality in its portfolio.  The transaction is immediately accretive to Realty Income's FFO, and enables it to increase its dividend.  The $12.21 per share implied value of the transaction to ARCT shareholders on the announcement date, and the $11.88 per share implied value based on Realty Income's current stock price, is simply grossly inadequate. 

Realty Income's implied offer price represented only a 2.1% premium over ARCT's closing price on the day prior to the merger announcement, aberationally low for a control premium.  This is neither a merger-of-equals nor an acquisition of a distressed seller.  Your argument that it represents a healthier premium over your IPO price misses the point entirely – that increase in value was already in the stock price and Realty Income should be paying a much more substantial premium to that current value.  The exchange ratio is simply unfair to ARCT shareholders, and it delivers a stock with a dividend per share about 20% lower than what they receive from ARCT.

We are further concerned that this transaction is the product of a deeply flawed sale process.  Your preliminary proxy statement indicates that the Company was shopped in the summer of 2011, prior to its IPO, with interest solicited from over 40 third parties.  The bids received (including from Realty Income), were viewed as inadequate, and the Company instead IPO'd on March 1, 2012.  In August 2012, Realty Income renewed its interest, and the Company from that point dealt exclusively with Realty Income and neither it nor its banker solicited interest from any other buyer.  Why not?  Realty Income's offer is certainly not preemptive.  And having dealt exclusively with Realty Income, why did you not get the right to "go shop" for a better offer for shareholders?  What was the rush, so soon after your listing, to consummate a sale transaction?  We fear Luxor may have identified the reason – a compensation plan that rewarded management for any value created in the six months following the IPO.

We hope that you will reconsider the proposed merger with Realty Income.  It clearly fails to maximize value for ARCT shareholders.  In the meantime, we have no choice but to join Luxor in voicing our disapproval of the merger and urging our fellow stockholders to vote against it. 

Sincerely,

Thomas E. Sandell

Chief Executive Officer

CONTACT: Mr. Tom Sandell, Chief Executive Officer, Sandell Asset Management Corp., +1-212-603-5700

SOURCE Sandell Asset Management