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Orange Capital Issues Statement and Releases KEY Questions in Advance of Today's GNL Management Call

Both ISS and Glass Lewis recommend GNL shareholders vote AGAINST the proposed value-destructive merger of GNL and RTL

NEW YORK, Sept. 5, 2023 /PRNewswire/ -- Orange Capital Ventures, LP ("Orange Capital"), a New York-based investment firm, today announced its continued opposition to the proposed merger of Global Net Lease, Inc. (NYSE: GNL) ("GNL" or the "Company") and the Necessity Retail REIT, Inc. (Nasdaq: RTL) ("RTL") (the "Merger"). We believe the merger not only lacks substantial financial or strategic value but also erodes shareholder value in both the near and long term.

Today's statement by GNL, asserting that the internalization consideration falls within the range of values observed in previous transactions, omits CRITICAL facts about GNL's Advisory Agreement (the "Advisory Agreement") governing the external management relationship between GNL and AR Global, including:

  • This Advisory Agreement may be terminated in connection with a change of control for GNL to an independent third party (an "Independent COC").

  • In an Independent COC, AR Global would only be entitled to a 2.5x advisory fee multiple, estimated by Orange Capital to be approximately $83 million. This Independent COC 2.5x multiple decreases to 2.0x from June 2025 through June 2030, and then to 1.5x thereafter.

  • We believe the proposed Merger's $375 million "internalization" fee payable to AR Global is $292 million more than AR Global would currently receive in an Independent COC.

  • According to our analysis, an Independent COC would save over $2.70 per GNL share for shareholders, representing an increase of more than 25% from the unaffected share price before the Merger. It would also result in zero NAV dilution if paid with cash.

  • The $375 million internalization fee would be paid to AR Global in GNL stock, requiring the issuance of a substantial amount of stock to AR Global at a valuation that represents a 49% discount to our estimated GNL NAV. If GNL's shares were to trade at the portfolio's NAV, Orange Capital believes the value of the AR Global payment would likely exceed $680 million, approximately TWENTY TIMES (20x) annual advisory fees.

The following are our questions for management on today's call in regard to the cost of internalization:

  1. Why did GNL make no reference to comparable internalization transactions with similar termination clauses in its proxy statement or public release?

  2. What evidence exists that the GNL Board leveraged this specific termination feature in the Advisory Agreement during the internalization negotiation?

  3. Why has the Company provided no evidence that the GNL Board considered any other transaction besides the Merger, including a more attractive termination fee under an Independent COC?

Some of our other questions about the Merger include:

  1. What was the GNL Board's process for considering the RTL merger?

  2. Is the Merger necessary to internalize the management of GNL?

  3. Will GNL publicly commit to implementing the Merger's governance enhancements, regardless of the Merger vote outcome?

  4. What analysis was conducted to assess the impact on GNL's shares of governance reforms without any transaction?

We are pleased that BOTH ISS and Glass Lewis share our views that the proposed Merger is the result of the GNL Board's flawed sale process, resulting in a transaction that we believe was in direct response to the Blackwells proxy contest and one that, as ISS states, "appears to disproportionately favor all other parties involved, at the expense of GNL shareholders." These highly respected shareholder advisory firms recommend shareholders vote AGAINST the proposed Merger at the upcoming special meeting of stockholders, scheduled for September 8, 2023.

Additionally, on June 5, 2023, the GNL Board awarded Blackwells Capital ("Blackwells") $23 million worth of GNL stock and an estimated $5.3 million in expense reimbursement as part of a cooperation agreement (the "Blackwells Cooperation Agreement)". Following the execution of the Blackwells Cooperation Agreement, Blackwells shifted from being a vocal dissident to expressing support for the Merger. Orange Capital believes that this payment to Blackwells by the GNL Board would reduce Blackwells' cost basis by an estimated $5.50 per share, representing a 52% discount to GNL's unaffected stock price. We contend that Blackwells' interests now significantly diverge from those of other GNL shareholders, and therefore, their views should be DISREGARDED.

Orange Capital reiterates its intention to vote AGAINST the Merger. Our detailed presentation outlining why we intend to vote AGAINST the proposed merger can be found here.

Investor Contacts
Daniel Lewis, Orange Capital
Walied Soliman, Norton Rose Fulbright LLP

Media Contacts 
ASC Advisors
Taylor Ingraham / Steve Bruce / 


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SOURCE Orange Capital Ventures, LP