Filed by American Realty Capital Properties, Inc.
Commission File No. 1- 35263
Pursuant to Rule 425 Under the Securities Act of 1933
Subject Company: Cole Credit Property Trust III, Inc.
Commission File No. 000-53960
Explanatory Note
On April 5, 2013, Nicholas S. Schorsch, the Chairman and CEO of American Realty Capital Properties, Inc. (“ARCP”), appeared in a television segment on CNBC entitled “Mad Money” with Jim Cramer, whereby Mr. Schorsch discussed a business combination transaction with Cole Credit Property Trust III, Inc. (“CCPT III”) proposed by ARCP, which may become the subject of a registration statement filed with the SEC. The transcript of the television segment, which became available on April 5, 2013, is being filed pursuant to Rule 425 of the Securities Exchange Act of 1933, as amended.
CNBC’s Mad Money
“Does American Realty Capital Have the ‘REIT’ Stuff?”
Nicholas Schorsch and Jim Cramer
April 5, 2013
Jim Cramer: In a world where the FED is likely to keep interest rates low for a long time, possibly much longer than we thought after today's dismal March jobs numbers, investors looking for income need to go out and hunt for yield. Because you can't get it from bonds or CDs. But you know where you can find some fabulous yields? The Real Estate Investment Trust. Take American Realty Capital Partners, ARCP. It’s the fourth largest triple-net lease REIT out there, meaning that their tenants have to pay not rent, but also property taxes, insurance, maintenance costs. We spoke to the COO a month ago. Since then, the stock has given you about a 13% gain with reinvested dividends. And Speaking of dividends, ARCP still gives you, after that run, a bountiful 6.1% yield. Latest wrinkle here, though, is that American Realty Capital has been trying to take over trying to take over Cole Credit Property Trust number three in order to become the largest net lease player in the industry. Back on March 19th, ARCP offered to pay $12 a share for Cole. It is a private company but it does have a share price. That's a 20% premium. It’s an all-stock deal worth $9 billion. Cole’s credit board, they convened a special committee, they said no immediately. So, on March 27th, ARCP upped its bid to a minimum of $13.59 a share, or $9.7 billion, just like that. And then, three days ago, ARCP increased the cash portion of the bid, offering to pay cash for as much as 60% of the Cole credit. Then, earlier today - just today! - Cole credit rejected this better off too. So, tonight we’ve got to figure out what’s going on here. We’ve got to give ARCP the chance to tell their side of the story. That’s why I’m thrilled to have Nick Schorsch back on (he is the Chairman and CEO of American Realty Capital) to talk about his jilted bid and what his company’s going to do next. Mr. Schorsch, welcome back to Mad Money. Have a seat.
Nicholas Schorsch: Thanks Jim.
Jim Cramer: Good to see you.
Jim Cramer: Alright, now a lot of people might be saying, well, I want to look up this Cole Credit Properties Trust. Maybe I should be buying that, not ARCP. So, just walk us through why that’s not the case, but that how you’re trying to make people who do have shares of that a lot richer than they are right now.
Nicholas Schorsch: Sure. Well, Cole Credit III is a non-traded public REIT, so it is a public company but it does not trade and the offering has closed, so you can’t buy more shares now-
Jim Cramer: Even if you wanted to. Like, no one can call someone and buy with their broker. They can’t get it.
Nicholas Schorsch: No.
Jim Cramer: Ok.
Nicholas Schorsch: And so, in a similar situation to what we saw with our own deal about a month ago, where we bought ARCT III (that was also a non-traded REIT), so, in this situation we made a similar offer for cash and stock, and we just recently, as you said, upped the cash allocation up to 60% to sweeten the bid, and to further that, Barclays, the large international bank, has issued a back stop for us to allow to us do that, for about $4.7 billion of cash.
Jim Cramer: Okay. Now, I should let everyone be aware that we spoke to Cole because we wanted their side of the story. They were very aggressive in telling us that this is something that is not good for their shareholders, okay. And the first thing they said was that, “Can you elaborate on” (and I'm just reading), “on the highly confident letter you received from Barclays, given that your pro forma company would be highly levered, on what terms could you expect to raise that financing?”
Nicholas Schorsch: Well, the Barclays commitment is already committed. So this is a – the Barclays commitment is not a “how would we do it?” It's “we have done it,” and Barclays has issued the highly confident letter based on our balance sheet, based on our ability to raise capital, because, remember, Jim, we are very low levered.
Jim Cramer: Right.
Nicholas Schorsch: So we we’re one of the lowest -
Jim Cramer: They say that you represent highly speculative financial engineering, that’s another point they are raising to us.
Nicholas Schorsch: Again this is all - the mud slinging doesn't really –
Jim Cramer: There is a lot of mud slinging!
Nicholas Schorsch: Yeah. The mud slinging doesn't really get us where we need to go in this situation because, quite honestly, you can't really know what we're planning unless you engage.
Jim Cramer: Right.
Nicholas Schorsch: So, this really comes down to a voice and a vote. I mean, this is America, right?
Jim Cramer: Right.
Nicholas Schorsch: So, at the end of the day, we want the shareholders to have the opportunity to have a choice. Now, this is a fully, this is a bona fide bid –
Jim Cramer: Right.
Nicholas Schorsch: For $9.7 billion. We don't take that lightly. We are a large public company and we have both Barclays and Weil Gotshal, the law firm, involved on our side of the table. We also have the ability to raise capital because we're a seasoned company. We’re not - we have a shelf offering available if we were looking to raise equity. But at the same time, this offer is fully financed. We have availability in our current balance sheet of more than $2.5 billion under our line with the expansion feature.
Jim Cramer: Ok. Will existing shareholders in American Reality Capital Properties be compromised at all by this?
Nicholas Schorsch: Well, that's the best part. Our motives are pretty simple. We are looking for - we are looking to buy the company. It’s a great acquisition for us.
Jim Cramer: Right.
Nicholas Schorsch: It’s about – as we've disclosed – it’s about 10% accretive to our current earnings -
Jim Cramer: Right.
Nicholas Schorsch: Which we've already given you guidance on - at about 93 cents a share, and our next year's growth guidance is about 16%. So, when you really come down to it, it's about growing earnings. It’s about delivering to our shareholders, and the Cole shareholders, but most importantly ARCP shareholders. It’s about growing the earnings.
Jim Cramer: Even though it’s – they’re are a bigger company.
Nicholas Schorsch: Well, they’re a bigger company from the standpoint that they also have a very large debt balance sheet.
Jim Cramer: Right.
Nicholas Schorsch: So, they have about $3.6 billion of debt currently and we only have about $750 million of debt.
Jim Cramer: All right. One thing that I - you were on last time and I tried to press you on dividend. You said, “Listen, it’s in the future.”
Nicholas Schorsch: Correct.
Jim Cramer: But you did put out in your proposal that ARCP, post-merger, will increase dividend for seventh consecutive quarter and it will go from from 91 to 93. If this deal doesn't go through, is that not going to happen?
Nicholas Schorsch: Well, let’s be, let’s go back for one minute. Since I was last here, we did raise our dividend.
Jim Cramer: Ok.
Nicholas Schorsch: So we raised our dividend from 90 to 91 cents, which is our largest dividend hike –
Jim Cramer: Ok.
Nicholas Schorsch: That we've had. Now, the reality of it is, our earnings growth continues, as I said to you before. Our board looks at dividend growth based on earnings growth, and they go together. So, we're projecting a 16% earnings growth for next year and our board will re-evaluate dividends, with or without the Cole merger.
Jim Cramer: But, in other words, it would be- we know -
Nicholas Schorsch: This is an automatic increase merger. This is automatic increase at merger.
Jim Cramer: So it is an automatic increase.
Nicholas Schorsch: Yes, but that’s also in the quarter. So we've done one already this quarter. This would be a second increase in the same quarter.
Jim Cramer: If you get this deal done.
Nicholas Schorsch: Yes.
Jim Cramer: All right.
Nicholas Schorsch: So, the other thing that is really very important, Jim, is that our business is very robust. Our pipeline is strong. This deal is not going to impact our business, one way or the other. It does impact those shareholders, because this has surety for them. And a potential IPO, a potential listing, that they don't get to vote on, when you’re consolidating an affiliated entity: there’s issues. And, I think, ultimately, at the end of the day, our offer is something that we don't think the shareholders should be deprived of without their vote.
Jim Cramer: I can't opine whether it's good for them. I know it is good for ARCP shareholders. That's where I am.
Nicholas Schorsch: And that's where I am too.
Jim Cramer: Ok, thank you very much. That’s Nick Schorsch, Chairman and CEO of American Realty Capital Properties, ARCP. I urge you to look some of the materials they have out about what it would mean if they did this deal, particularly diversification of clients, which is something you know I care greatly about, because the economy is still in uncertain terms. ARCP. I like it, even up here. This is David Cramer.
Additional Information about the Proposed Transaction and Where to Find It
This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. This communication relates to a business combination transaction with CCPT III proposed by ARCP, which may become the subject of a registration statement filed with the SEC. This material is not a substitute for the proxy statement/prospectus ARCP would file with the SEC regarding the proposed transaction if such a negotiated transaction with CCPT III is reached or for any other document which ARCP may file with the SEC and send to ARCP’s or CCPT III’s stockholders in connection with the proposed transaction. INVESTORS AND SECURITY HOLDERS OF ARCP AND CCPT III ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS (INCLUDING ALL AMENDMENTS AND SUPPLEMENTS THERETO) AND OTHER RELEVANT DOCUMENTS FILED WITH THE SEC IN THEIR ENTIRETY IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. Such documents would be available free of charge through the website maintained by the SEC at www.sec.gov or by directing a request to the ARCP Investor Relations Department, 405 Park Avenue, New York, New York 10022. Copies of such documents filed by ARCP with the SEC also will be available free of charge on ARCP’s website at www.arcpreit.com.
ARCP, AR Capital, LLC and their respective directors and executive officers and other persons may be deemed to be participants in the solicitation of proxies from ARCP’s and CCPT III’s stockholders in respect of the proposed transaction. Information regarding ARCP’s directors and executive officers can be found in ARCP’s definitive proxy statement filed with the SEC on May 4, 2012, as modified by ARCP’s current reports on Form 8-K filed with the SEC on October 17, 2012 and March 6, 2013. Additional information regarding the interests of such potential participants will be included in any proxy statement/prospectus and other relevant documents filed with the SEC in connection with the proposed transaction if and when they become available.
All information in this communication concerning CCPT III, including its business, operations and financial results was obtained from public sources. While ARCP has no knowledge that any such information is inaccurate or incomplete, ARCP has not had the opportunity to verify any of that information.
Forward-Looking Statements
Information set forth in this communication (including information included or incorporated by reference herein) contains “forward-looking statements” (as defined in Section 21E of the Exchange Act), which reflect ARCP’s expectations regarding future events. The forward-looking statements involve a number of risks, uncertainties and other factors, many of which are outside ARCP’s control, that could cause actual results to differ materially from those contained in the forward-looking statements. Such risks and uncertainties relating to the proposed transaction include, but are not limited to, CCPT III’s failure to accept ARCP’s proposal and enter into definitive agreements to effect the transaction, whether and when the proposed transaction will be consummated, the new combined company’s plans, market and other expectations, objectives, intentions, as well as any expectations or projections with respect to the combined company, including regarding future dividends and market valuations, and other statements that are not historical facts.
The following additional factors, among others, could cause actual results to differ materially from those set forth in the forward-looking statements: the ability to obtain regulatory and stockholder approvals for the transaction; market volatility; unexpected costs or unexpected liabilities that may arise from the transaction, whether or not consummated; the inability to retain key personnel; ARCP’s ability to achieve the cost-savings and synergies contemplated by the proposed transaction within the expected time frame; ARCP’s ability to promptly and effectively integrate the businesses of CCPT III and ARCP; disruption from the proposed transaction making it more difficult to maintain relationships with tenants; the business plans of the tenants of the respective parties; continuation or deterioration of current market conditions; and future regulatory or legislative actions that could adversely affect the companies. Additional factors that may affect future results will be contained in ARCP’s filings with the SEC from time to time. ARCP disclaims any obligation to update and revise statements contained in these materials based on new information or otherwise.