By Kannaki Deka
(Reuters) -Realty Income said on Monday it would buy Spirit Realty Capital (NYSE:SRC) in an all-stock deal valued at $9.3 billion as it looks to expand its real estate portfolio.
The announcement of the deal, which sent shares of Spirit Realty up 13% in premarket trading, comes at a time when the U.S. commercial real estate faces pressure from tightening financial conditions and a deteriorating economic outlook.
Commercial real estate, especially offices, has been hit by interest rates hikes and workers choosing to stay at home.
The combined portfolio is expected to result in reduced rent concentration for Realty Income (NYSE:O)'s clients, while increasing the combined portfolio's annualized contractual rent from $3.8 billion to $4.5 billion, Realty Income said.
"Spirit's assets are highly complementary to our existing portfolio, extending our investments in industries that have proven to generate durable cash flows over several economic cycles," Sumit Roy, chief executive officer of Realty Income, said in a statement.
Under the terms of the agreement, Spirit shareholders would receive $37.34 per share, a premium of 15.4% from the stock's last close, valuing the real estate investment trust at $5.28 billion, according to Reuters calculations.
At the deal's closing, which is expected during the first quarter of 2024, Realty Income and Spirit shareholders would own about 87% and 13%, respectively, of the combined company.
Wells Fargo is the financial adviser to Realty Income, while J.P. Morgan Securities and Morgan Stanley & Co (NYSE:MS) are serving as financial advisers to Spirit Realty.
Spirit Realty primarily invests in single-tenant real estate assets given on long-term leases. It comprises 2,064 retail, industrial and other properties across 49 states, as of June 30.