American Realty Capital Global Trust II And Global Net Lease To Merge

8/8/16

American Realty Capital Global Trust II, Inc. announced today that its Board of Directors unanimously approved a definitive agreement to merge with Global Net Lease, Inc. to create a premier, global, single-tenant net lease REIT with a pro forma enterprise value of $3.3 billion.

The acquisition of Global II, valued at $647.9 million, includes a fixed exchange ratio of 2.27 GNL shares for each share of Global II common stock owned, providing Global II shareholders with a per share dividend of$1.61 once the transaction closes. Based on GNL's August 5, 2016, closing price of $8.63, each Global II share would be exchanged for $19.59 of GNL stock; the fixed exchange ratio allows Global II shareholders the opportunity to participate in share price movement, including any upside in GNL's stock going forward. The combined company will own 345 properties in 7 countries, achieving needed critical scale for Global II. The combined company will have a more broadly diversified portfolio of high-quality real estate assets and should have enhanced access to global capital markets and a lower cost of capital than Global II.

The combined company will retain the Global Net Lease name, trade on the New York Stock Exchange under the ticker symbol "GNL," and continue to be led by the current management team of GNL. The transaction is expected to close in the fourth quarter of 2016.

Lee M. Elman, Lead Independent Director of Global II, explained, "The independent directors of the Global II Board, with the assistance of legal and financial advisors, thoroughly evaluated potential options to maximize value for our shareholders. We are confident that this transaction is in the best interest of all. Global II's disciplined investment philosophy of acquiring high-quality, income producing properties, long term net-leased to creditworthy tenants, was our foundation, and GNL's portfolio is highly complementary to this strategy. And the upside potential of owning GNL is significant. GNL is a global company with a strong and flexible capital structure, access to global capital markets, and a low cost of capital. The $6.1 million in annual cost savings as estimated on a 2016 basis resulting from combining the two companies represents an immediate material benefit to our shareholders that will be supported by GNL's low cost operating profile. In addition, going forward the dividend is strengthened by an improved AFFO coverage ratio. With this transaction, GNL shareholders will continue to own a best-in-class international real estate portfolio."

The merger of Global II and GNL creates a number of significant benefits for Global II shareholders:

  • Achieves Critical Scale: The combination of the Global II and GNL property portfolios creates a premier global net lease REIT with 345 properties in 7 countries. GNL should provide the added scale, flexible capital structure, access to global capital markets, and low cost of capital which will allow the combined company to competitively pursue large future transactions, generate growth and create increased shareholder value.
  • Saves Estimated $6.1 million of Costs: The transaction eliminates $6.1 million of annual costs as estimated on a 2016 basis, including a $1.6 million net reduction in management fees and a $4.5 millionreduction in duplicative corporate G&A. This savings combined with a favorable fee structure is an advantage to shareholders that is reflected in the exchange ratio.
  • Increases Tenant Diversification: The transaction accomplishes the goal of equal portfolio weight of U.S. and International assets for the combined portfolio, with a high level of tenant and industry diversity. The top 10 tenants in the combined company will account for just 35% of annualized NOI, down from Global II's current top 10 tenant concentration of 94%.
  • Builds on Strong Tenant Base: The Global II and GNL portfolios are highly complementary from a tenant credit standpoint. The combined company's investment grade tenants, implied investment grade tenants, and tenants who are subsidiaries of investment grade parents, will contribute a market leading 70% of annualized rent.
  • Substantially Extend Average Remaining Lease Term: The combined company significantly improves Global II's weighted average remaining lease term by 20%, from 8.8 years to 10.6 years. Further, there are no near term leasing maturities until 2020, and the majority of leases do not expire until at least 2029.
  • Improves Dividend Coverage: GNL's industry leading dividends are supported by stable cash flows from long term leases to diverse, largely investment grade tenants. This provides AFFO coverage of 106% for GNL shareholders, and represents a material improvement over the Global II dividend which is only 83% covered by AFFO.
  • Strong "Go Shop" Providing Shareholder Protections: A "Go Shop" process of 45 days will allow potential for obtaining optimum value for Global II shareholders by allowing third parties the opportunity to submit a superior offer.

Pursuant to the terms of the merger agreement, Global II shareholders will receive a fixed exchange ratio of 2.27 GNL shares for each share of Global II common stock owned, which allows Global II shareholders the opportunity to participate in share price movement in GNL's stock going forward. Upon close of the transaction, the combined company will immediately list the newly issued common shares on the NYSE, which will trade under GNL's existing ticker, "GNL." Based on GNL's August 5, 2016, closing price of $8.63 per share, each Global II share would be exchanged for $19.59 of GNL stock. This would represent total consideration of$247.0 million based on Global II fully diluted common shares outstanding as of July 31, 2016. In addition, GNL will assume or repay $424.3 million in existing indebtedness (net of $23.4 million cash and equivalents) as ofMarch 31, 2016, representing an enterprise value of $647.9 million.

The combined company will continue to employ GNL's current management team. The combined company will have a five member board of directors, four of whom will be independent. Of these, one will be a newly appointed independent director initially designated by Global II.

The completion of the transaction is subject to the receipt of approval of Global II and GNL shareholders, and customary regulatory approvals and closing conditions. A joint proxy statement/prospectus will be filed on Form S-4 with the Securities and Exchange Commission, which will describe the proposed merger.

BMO Capital Markets served as financial advisor to the Special Committee of Global II and Miles & Stockbridge P.C. served as legal advisor to the Special Committee of Global II.