The proposed deal with CapLease will provide one of the few missing components for ARCP's growing net lease brand: management. In short, I have often suggested that ARCP would become a great REIT as soon as it builds out a management team and now that ARCP is rolling up LSE's management team, I believe that ARCP has all of the ingredients to become a dynamite dividend brand.
The synergies between ARCP and LSE will provide not only a sound financial structure (ARCP will also increase its percentage of investment grade tenants) but also a fully-integrated operating platform, that in my opinion, has been the missing link for the three-year old REIT.
Also, ARCP has continually paid out dividends (three increases this year) and the impact with the proposed LSE is expected to be highly accretive by around 10%. ARCP's payout ratio is around $.94 and the revised earnings (mid-point guidance of $1.19) forecast will reduce the payout ratio and provide meaningful safety for dividend investors.
The merger is still not official until the end of the "go-shop" period commencing immediately and ending on July 7, 2013. The merger agreement does provide for a termination fee and expense reimbursement of $15 million if CapLease terminates (and elects to accept a superior bid).At the time of publication, the author had no position in any of the stocks mentioned. Follow @swan_investor This article was written by an independent contributor, separate from TheStreet's regular news coverage.
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