NEW YORK (AP) -- American Realty Capital is buying rival Cole Real Estate for more than $7 billion in cash and stock.
The deal will create a real estate investment trust with more than 3,700 retail, office and other properties, leased to 600 tenants, covering over 100 million square feet in 49 states and Puerto Rico, the companies said Wednesday.
American Realty, based in New York, said the deal dramatically increases its size and also positions it to potentially join the Standard & Poor's 500. The companies also see cost savings of $70 million in the first year.
Cole shares jumped 9 percent to $14.02 in premarket trading, while shares of American Realty rose 3 percent, to $13.80.
"This merger represents a new beginning for former competitors and we look forward to uniting two of the industry's most talented organizations," American Realty Chairman and CEO Nicholas Schorsch said. "Far more can be accomplished by these two great companies working together than either one could have hoped to achieve independently."
Shareholders of Cole Real Estate Investments Inc., based in Phoenix, can choose to take $13.82 in cash or 1.0929 shares of American Realty Capital Properties Inc., which closed at $13.35 Tuesday. Based on the 489.8 million shares of Cole that are outstanding, the companies' estimate of $14.59 per share puts the value of the deal at $7.15 billion.
Two of Cole's independent directors will join American Realty's board, subject to approval of the company's current board.
Shareholders of both companies must still approve the deal, which is expected to close in the first half of next year.