Global Net Lease and The Necessity Retail REIT to Merge, Creating Sector-Leading Diversified Net Lease REIT
Adopts Enhanced Corporate Governance Practices; Internalization of Management to Support Scaled Platform
All-Stock Transaction Projected to be More Than 9% Accretive to GNL Q1'23 AFFO Per Share
The Transactions were unanimously recommended by the Special Committees of the Boards of Directors of both GNL and RTL, comprised of independent directors, and approved by the full Boards of Directors. The Transactions are expected to close in the third quarter of 2023, subject to the satisfaction of closing conditions and approval by the stockholders of GNL and RTL.
Summary of the Merger's Strategic Benefits
The Merger is expected to create several operational and financial benefits for
- Immediately Accretive: The Transactions are expected to be more than 9% accretive in Q4'23 relative to GNL's Q1'23 adjusted funds from operations ("AFFO") per share on an annualized basis.
- Reduced Leverage: Net debt to annualized adjusted EBITDA is expected to be reduced from 8.3x for GNL in Q1'23 and 9.6x for RTL in Q1'23 to an estimated 7.6x in Q4'23 for
- Significantly Increased Size, Prominence, and Scale: Based on portfolios as of
March 31, 2023, the Merger will create the third largest publicly traded net lease REIT with a global presence. GNL Post-closing will achieve greater diversity by geography, asset type, tenant, and industry, spanning industrial, retail, and office assets across North Americaand Europe, allowing for greater balance sheet flexibility and the ability to grow and optimize the portfolio. As a larger entity, GNL post-closing is expected to have access to larger asset and portfolio acquisitions with reduced concentration and integration risk and expected to have greater access to capital. GNL Post-closing's portfolio is anticipated to consist of 1,356 properties in 49 different states and 11 different countries, and top 10 tenant concentration is expected to be 19.2% of straight-line rent.
- Substantial Corporate Synergies and Cost Savings: The combination of GNL and RTL is expected to create a more efficient and competitive platform through the integration of adjacent best practices and reduction of equivalent functions, including corporate consolidation, public company cost savings, and elimination of other duplicative services. Annual run-rate cost savings are projected to be approximately
$21 millionrealized within 12 months of the close of the Transactions.
- Attractive Dividend: GNL expects that, post closing, the
GNL Post-closing Board will establish a new dividend policy of paying a quarterly dividend equal to $0.354per share ( $1.42per share, annualized). Q4'23 AFFO expected to be $0.42per share ( $1.68per share, annualized).
Summary of the Internalization Transaction's Strategic Benefits
The Internalization is expected to enhance corporate governance, as well as provide a number of operational and financial benefits, including:
- Substantial Cost Savings: The Internalization is projected to result in annual cash savings of approximately
$54 millionthrough elimination of the asset management fees, property management fees, incentive fees, equity issuance fees, and reimbursable expenses currently payable to the External Manager, net of internalized employee compensation, rent and overhead, and excluding the one-time costs associated with the Transactions.
- Simplified Company Structure: The Internalization is expected to simplify
GNL Post-closing's structure through the unification of all investment activities, corporate operations, and resources under a single, transparent organization. Internalizing management will provide GNL Post-closing control over key functions that are critical to both the growth of its business and maximizing stockholder value.
- Valuation: It is anticipated that there is significant potential for trading multiple expansion as investors recognize the value created through the Transactions, as internally managed peers have historically traded at significantly higher multiples than externally managed REITs.
Key Corporate Governance Updates
- The Board of Directors of
GNL Post-closing intends to opt out of the classified board provision of MUTA under the terms of the Merger Agreement.
- Declassify its Board of Directors, so that seven of the nine directors would stand for election to annual terms at the 2024 annual meeting of stockholders, and all nine directors would stand for election to annual terms at the 2025 annual meeting.
Repeal Company'sStockholder Rights Plan (commonly referred to in the industry as a 'poison pill').
- Amend bylaws to delete the requirement that up to two board members to be "managing directors."
Current GNL Chief Executive Officer
Under terms of the Merger Agreement, RTL stockholders will receive 0.670 shares of GNL for each common share of RTL, which represents a total consideration of
Pursuant to the internalization agreement, upfront consideration to the External Manager will consist of
The Merger Agreement provides RTL with a go-shop period of 30 days, during which the Special Committee of the RTL Board of Directors and its advisors may actively solicit alternative proposals from third parties, subject to certain limited exceptions. RTL will have the right to terminate its respective Merger Agreement with GNL to accept a superior proposal, subject to the terms and conditions of the Merger Agreement. There can be no assurance that this "go-shop" process will result in superior proposals, and RTL does not intend to disclose developments with respect to the solicitation process unless and until the Special Committee of their Board of Directors make a determination with respect to any potential superior proposal.
GNL has made a presentation detailing the highlights of the proposed Transactions available at investors.globalnetlease.com.
The GNL Special Committee, consisting entirely of independent directors, was advised by
The statements in this press release that are not historical facts may be forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause actual results or events to be materially different. In addition, words such as "may," "will," "seeks," "anticipates," "believes," "estimates," expects," "plans," "intends," "would," or similar expressions indicate a forward-looking statement, although not all forward-looking statements contain these identifying words. Any statements referring to the future value of an investment in GNL, including the adjustments giving effect to the Merger and the Internalization as described in this press release, as well as the potential success that GNL may have in executing the Merger and Internalization, are also forward-looking statements. There are a number of risks, uncertainties and other important factors that could cause GNL's actual results, or GNL's actual results after making adjustments to give effect to the Merger and the Internalization, to differ materially from those contemplated by such forward-looking statements, including but not limited to: (i) GNL's and RTL's ability to complete the proposed Merger and Internalization on the proposed terms or on the anticipated timeline, or at all, including risks and uncertainties related to securing the necessary stockholder approvals and satisfaction of other closing conditions to consummate the proposed transaction, (ii) the occurrence of any event, change or other circumstance that could give rise to the termination of the Merger Agreement relating to the proposed Transactions, (iii) ability of GNL to obtain lender consent to amend its Second Amended and Restated Credit Facility or any other Company loan agreement, if at all, or on terms favorable to the Company, (iv) risks related to the potential repeal of GNL's Stockholder Rights Plan; (v) risks related to the decrease in the beneficial ownership requirements of GNL's applicable classes and series of stock; (vi) risks related to diverting the attention of GNL's and RTL's management from ongoing business operations, (vii) failure to realize the expected benefits of the proposed Transactions, (viii) significant transaction costs and/or unknown or inestimable liabilities, (ix) the risk of stockholder litigation in connection with the proposed transaction, including resulting expense or delay, (x) the risk that RTL's business will not be integrated successfully or that such integration may be more difficult, time-consuming or costly than expected, (xi) risks related to future opportunities and plans for the
In connection with the proposed Merger and Internalization and the related proposed transactions, GNL intends to file with the
Participants in the Proxy Solicitation
GNL, RTL, GNL OP, RTL OP, Advisor Parent, GNL Advisor and RTL Advisor, and their respective directors, executive officers and other members of management and employees may be deemed to be participants in the solicitation of proxies in respect of the proposed Transactions. Information about directors and executive officers of GNL is available in the GNL proxy statement for its 2023 Annual Meeting, which was filed with the
Investors and Media:
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