Item 1.01 Entry Into a Material Definitive Agreement.
The Transactions
On April 29, 2021, VEREIT, Inc., a Maryland corporation ("VEREIT"), and VEREIT
Operating Partnership, L.P., a Delaware limited partnership ("VEREIT OP"),
entered into an Agreement and Plan of Merger (the "Merger Agreement") with
Realty Income Corporation ("Realty Income"), a Maryland corporation, Rams MD
Subsidiary I, Inc., a Maryland corporation and wholly owned subsidiary of Realty
Income ("Merger Sub 1"), and Rams Acquisition Sub II, LLC, a Delaware limited
liability company and wholly owned subsidiary of Realty Income ("Merger Sub 2").
Pursuant to the terms and conditions of the Merger Agreement, upon the closing,
(i) Merger Sub 2 will be merged with and into VEREIT OP (the "Partnership
Merger"), with VEREIT OP continuing as the surviving entity and, immediately
following the Partnership Merger, (ii) VEREIT will be merged with and into
Merger Sub 1, with Merger Sub 1 continuing as the surviving corporation (the
"Merger" and, together with the Partnership Merger, the "Mergers").
Merger Agreement
The Partnership Merger
Pursuant to the terms and subject to the conditions of the Merger Agreement, at
the date and time the Partnership Merger becomes effective (the "Partnership
Merger Effective Time"), (i) each outstanding VEREIT OP Common Unit (as defined
in the Merger Agreement) owned by VEREIT immediately prior to the Partnership
Merger Effective Time, subject to the terms and conditions set forth in the
Merger Agreement, will remain outstanding as a common unit of partnership
interest in the surviving entity, (ii) each outstanding VEREIT OP Common Unit
owned by a partner of VEREIT OP other than VEREIT (each such partner, a "VEREIT
OP Minority Partner") that is issued and outstanding immediately prior to the
Partnership Merger Effective Time, subject to the terms and conditions set forth
in the Merger Agreement, will be converted into 0.705 of a newly issued share of
common stock (the "Exchange Ratio"), par value $0.01 per share, of Realty Income
(the "Realty Income Common Stock"), subject to adjustment as provided in the
Merger Agreement, (iii) each outstanding VEREIT Series F Preferred Unit that is
issued and outstanding immediately prior to the Partnership Merger Effective
Time (other than VEREIT OP Series F Preferred Units owned by VEREIT), subject to
the terms and conditions of the Merger Agreement, will be converted into the
right to receive $25.00 plus all accumulated and unpaid distributions to and
including the day that is set forth in the Series F Preferred Stock Redemption
Notice (the "Series F Preferred Unit Redemption Amount"), and (iv) each VEREIT
OP Series F Preferred Unit owned by VEREIT that is issued and outstanding
immediately prior to the Partnership Merger Effective Time, subject to the terms
and conditions of the Merger Agreement, will remain outstanding as one Series F
Preferred Unit in the surviving entity. The VEREIT OP Minority Partners will
receive cash in lieu of fractional shares.
The Merger
Pursuant to the terms and subject to the conditions of the Merger Agreement, at
the date and time the Merger becomes effective (the "Effective Time"), (i) each
share of VEREIT common stock, par value $0.01 per share (the "VEREIT Common
Stock") will automatically be converted into a number of newly issued shares of
Realty Income Common Stock equal to the Exchange Ratio, subject to adjustment as
provided in the Merger Agreement and (ii) each share of VEREIT Series F
Preferred Stock issued and outstanding immediately prior to the Effective Time
will automatically be cancelled and retired and shall cease to exist, but the
holders of such shares will retain the right to receive the Series F Preferred
Stock Redemption Amount on the redemption date set forth in the Series F
Preferred Stock Redemption Notice (as defined below). Holders of shares of
VEREIT Common Stock will receive cash in lieu of fractional shares.
Redemption of VEREIT Series F Preferred Stock
Immediately prior to the Mergers, VEREIT will issue a notice of redemption (the
"Series F Preferred Stock Redemption Notice") with respect to all of the
outstanding shares of VEREIT Series F Preferred Stock with a redemption date as
set forth in the Series F Preferred Stock Redemption Notice, and Realty Income
will cause funds to be deposited in escrow to pay the redemption price for each
share of VEREIT Series F Preferred Stock at the liquidation preference of $25.00
plus all accrued and unpaid dividends up to and including the redemption date
set forth in the Series F Preferred Stock Redemption Notice (such amount, the
"Series F Preferred Stock Redemption Amount").
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Treatment of Equity Awards
Pursuant to the terms and subject to the conditions of the Merger Agreement, as
of the Effective Time, each outstanding VEREIT equity-based award will be
treated as follows: (i) each VEREIT stock option that is outstanding and
unexercised as of immediately prior to the Effective Time will be converted into
a Realty Income stock option to purchase a number of shares of Realty Income
Common Stock (rounded down to the nearest whole number of shares) equal to the
product obtained by multiplying the number of shares of VEREIT Common Stock
subject to such VEREIT stock option by the Exchange Ratio, at an exercise price
per share of Realty Income Common Stock (rounded up to the nearest whole cent)
equal to the quotient obtained by dividing the exercise price per share of
VEREIT Common Stock of such VEREIT stock option by the Exchange Ratio; (ii) each
award of VEREIT restricted stock units that is outstanding as of immediately
prior to the Effective Time will be converted into a Realty Income restricted
stock unit award with respect to a number of whole shares of Realty Income
Common Stock (rounded to the nearest whole number of shares) equal to the
product obtained by multiplying (A) (1) for time-based restricted stock units,
the number of shares of VEREIT Common Stock subject to such restricted stock
unit award as of immediately prior to the Effective Time or (2) for
performance-based restricted stock units, the number of shares of VEREIT Common
Stock subject to such performance-based restricted stock units determined based
on actual level of achievement of the applicable performance goals as of
immediately prior to the Effective Time (in accordance with the applicable award
agreement and the terms of the Merger Agreement) by (B) the Exchange Ratio, and
will be credited with a dividend equivalent balance that is equal to the
dividend equivalent balance credited on the corresponding VEREIT restricted
stock units as of immediately prior to the Effective Time; and (iii) each VEREIT
deferred stock unit award that is outstanding as of immediately prior to the
Effective Time will generally be converted into the right to a number of shares
of Realty Income Common Stock equal to the product obtained by multiplying the
Exchange Ratio by the number of shares underlying such award. Each converted
award will continue to be subject to the same vesting and other terms and
conditions as applied to the corresponding VEREIT award as of immediately prior
to the Effective Time, except that Realty Income restricted stock units
resulting from the conversion of performance-based VEREIT restricted stock units
will, following the Effective Time, be subject to the time-vesting conditions
applicable to the performance-based VEREIT restricted stock units, but will no
longer be subject to performance-vesting conditions.
Contemplated Spin-Off of Office Properties
It is contemplated that after the Effective Time, subject to the terms and
conditions of the Merger Agreement, VEREIT and Realty Income will contribute
certain of their office real properties (the "OfficeCo Business") to a newly
formed wholly owned subsidiary of Realty Income ("OfficeCo"), and Realty Income
will distribute all of the outstanding voting shares of common stock in OfficeCo
to Realty Income's shareholders (which, at that time, would also include the
VEREIT stockholders as a result of the Merger) on a pro rata basis (the
"Spin-Off"). Following the consummation of the Spin-Off, VEREIT and Realty
Income intend for OfficeCo to operate as a separate, publicly-traded REIT.
Subject to the terms and conditions of the Merger Agreement, the parties may
also seek to sell some or all of the OfficeCo Business in connection with the
closing of the Mergers.
Certain Governance Matters
The Merger Agreement provides that the boards of directors of VEREIT and
Realty Income will mutually select two members of the VEREIT board of directors
who will be appointed to the Realty Income board of directors immediately
following the Effective Time. After the Effective Time, the parties intend to
maintain the office of VEREIT located in Phoenix, Arizona for at least seven (7)
years from the date of the Merger Agreement.
Certain Other Terms and Conditions of the Merger Agreement
The Merger Agreement contains customary representations and warranties from each
of VEREIT and Realty Income. In addition, VEREIT has agreed to customary
pre-closing covenants, including covenants to use commercially reasonable
efforts to operate its business in the ordinary course and to refrain from
taking certain actions without Realty Income's consent. Realty Income has agreed
to customary pre-closing covenants, including a more limited set of covenants to
refrain from taking certain actions without VEREIT's consent. Each party has
agreed to additional covenants, including, among others, covenants relating to
(1) in the case of Realty Income, its obligation to call a meeting of its
. . .
Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal
Year.
On April 28, 2021, the Board of Directors of VEREIT authorized and approved an
amendment to the Amended and Restated Bylaws of VEREIT (the "Bylaw Amendment")
to add a new Article 8 designating the Circuit Court for Baltimore City,
Maryland, or, if that court does not have jurisdiction, another state or federal
court sitting in Maryland as the exclusive forum for certain legal actions
related to VEREIT. The Bylaw Amendment is effective as of April 28, 2021.
A copy of the Bylaw Amendment is attached hereto as Exhibit 3.1 and is
incorporated herein by reference. The foregoing descriptions of the Bylaw
Amendment do not purport to be complete and are qualified in their entirety by
reference to the full text of the Bylaw Amendment.
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Forward Looking Statements
This Current Report on Form 8-K may include "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act. All statements
other than statements of historical fact are "forward-looking statements" for
purposes of federal and state securities laws. These forward-looking statements,
which are based on current expectations, estimates and projections about the
industry and markets in which Realty Income Corporation ("Realty Income") and
VEREIT, Inc. ("VEREIT") operate and beliefs of and assumptions made by Realty
Income management and VEREIT management, involve uncertainties that could
significantly affect the financial or operating results of Realty Income,
VEREIT, the combined company or any company spun-off by the combined company.
Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks,"
"estimates," "will," and variations of such words and similar expressions are
intended to identify such forward-looking statements. Such forward-looking
statements include, but are not limited to, statements about the benefits of the
proposed transactions involving Realty Income and VEREIT, including future
financial and operating results, plans, objectives, expectations and intentions.
All statements that address operating performance, events or developments that
we expect or anticipate will occur in the future - including statements relating
to creating value for stockholders, benefits of the proposed transactions to
clients, employees, stockholders and other constituents of the combined company,
integrating our companies, cost savings and the expected timetable for
completing the proposed transactions - are forward-looking statements. These
statements are not guarantees of future performance and involve certain risks,
uncertainties and assumptions that are difficult to predict. Although we believe
the expectations reflected in any forward-looking statements are based on
reasonable assumptions, we can give no assurance that our expectations will be
attained and, therefore, actual outcomes and results may differ materially from
what is expressed or forecasted in such forward-looking statements. For example,
these forward-looking statements could be affected by factors including, without
limitation, risks associated with the ability to consummate the proposed merger
and the timing of the closing of the proposed merger; the ability to secure
favorable interest rates on any borrowings incurred in connection with the
proposed transactions; the impact of indebtedness incurred in connection with
the proposed transactions; the ability to successfully integrate our operations
and employees; the ability to realize anticipated benefits and synergies of the
proposed transactions as rapidly or to the extent anticipated by financial
analysts or investors; potential liability for a failure to meet regulatory or
tax-related requirements, including the maintenance of REIT status; material
changes in the dividend rates on securities or the ability to pay dividends on
common shares or other securities; potential changes to tax legislation; changes
in demand for developed properties; adverse changes in the financial condition
of joint venture partner(s) or major tenants; risks associated with the
acquisition, development, expansion, leasing and management of properties; risks
associated with the ability to consummate the proposed spin-off of a company
holding the office property assets of Realty Income and VEREIT ("SpinCo") and
the terms thereof, and the timing of the closing of the proposed spin-off; risks
associated with the ability to consummate any sales of office property assets of
Realty Income and VEREIT and the impact of such sales on SpinCo or the combined
company; failure to obtain debt financing to capitalize SpinCo; risks associated
with the geographic concentration of Realty Income, VEREIT or SpinCo; risks
associated with the industry concentration of tenants; the potential impact of
announcement of the proposed transactions or consummation of the proposed
transactions on business relationships, including with clients, employees,
customers and competitors; unfavorable outcomes of any legal proceedings that
have been or may be instituted against Realty Income, VEREIT or any company
spun-off by the combined company; costs related to uninsured losses,
condemnation, or environmental issues; the ability to retain key personnel;
costs, fees, expenses and charges related to the proposed transactions and the
actual terms of the financings that may be obtained in connection with the
proposed transactions; changes in local, national and international financial
markets, insurance rates and interest rates; general adverse economic and local
real estate conditions; the inability of major tenants to continue paying their
rent obligations due to bankruptcy, insolvency or a general downturn in their
business; foreign currency exchange rates; increases in operating costs and real
estate taxes; changes in dividend policy or ability to pay dividends for Realty
Income's or VEREIT's common stock or preferred stock; impairment charges;
unanticipated changes in Realty Income's or VEREIT's intention or ability to
prepay certain debt prior to maturity and/or hold certain securities until
maturity; pandemics or other health crises, such as coronavirus (COVID-19); and
those additional risks and factors discussed in reports filed with the U.S.
Securities and Exchange Commission ("SEC") by Realty Income and VEREIT.
Moreover, other risks and uncertainties of which Realty Income or VEREIT are not
currently aware may also affect each of the companies' forward-looking
statements and may cause actual results and the timing of events to differ
materially from those anticipated. The forward-looking statements made in this
communication are made only as of the date hereof or as of the dates indicated
in the forward-looking statements, even if they are subsequently made available
by Realty Income or VEREIT on their respective websites or otherwise. Neither
Realty Income nor VEREIT undertakes any obligation to update or supplement any
forward-looking statements to reflect actual results, new information, future
events, changes in its expectations or other circumstances that exist after the
date as of which the forward-looking statements were made.
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Additional Information 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. In
connection with the proposed transaction, Realty Income and VEREIT will file
with the Securities and Exchange Commission (the "SEC") a registration statement
on Form S-4 containing a joint proxy statement/prospectus and other documents
regarding the proposed transaction. The joint proxy statement/prospectus will
contain important information about the proposed transaction and related
matters. STOCKHOLDERS ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS
(INCLUDING ALL AMENDMENTS AND SUPPLEMENTS THERETO) AND OTHER RELEVANT DOCUMENTS
FILED WITH THE SEC CAREFULLY IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION ABOUT REALTY INCOME, VEREIT AND THE PROPOSED
TRANSACTION.
Investors and security holders of Realty Income and VEREIT will be able to
obtain free copies of the registration statement, the joint proxy
statement/prospectus and other relevant documents filed by Realty Income and
VEREIT with the SEC through the website maintained by the SEC at www.sec.gov.
Copies of the documents filed by Realty Income with the SEC are also available
on Realty Income's website at www.realtyincome.com, and copies of the documents
filed by VEREIT with the SEC are available on VEREIT's website at
www.vereit.com.
Realty Income, VEREIT and their respective directors and executive officers may
be deemed to be participants in the solicitation of proxies from Realty Income's
and VEREIT's stockholders in respect of the proposed transaction. Information
regarding Realty Income's directors and executive officers can be found in
Realty Income's definitive proxy statement filed with the SEC on April 1, 2021.
Information regarding VEREIT's directors and executive officers can be found in
VEREIT's definitive proxy statement filed with the SEC on April 15, 2021.
Additional information regarding the interests of such potential participants
will be included in the joint proxy statement/prospectus and other relevant
documents filed with the SEC in connection with the proposed transaction if and
when they become available. These documents are available on the SEC's website
and from Realty Income or VEREIT, as applicable, using the sources indicated
above.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
Exhibit No. Description
2.1* Agreement and Plan of Merger, dated April 2 9 , 2021, by and among
VEREIT, Inc., VEREIT Operating Partnership, L.P., Realty Income Corporation,
Rams MD Subsidiary I, Inc., and Rams Acquisitions Sub II, LLC.
3.1 Amendment to Amended and Restated Bylaws of VEREIT, Inc.
104 Cover Page Interactive Data File (embedded within the Inline XBRL document).
* Pursuant to Item 601 (6)(2) of Regulation S-K, the Disclosure Letters to the
Merger Agreement (identified therein) have been omitted from this Report and
will be furnished to the SEC supplementally upon request.
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