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:
- Why did GNL make no reference to comparable internalization
transactions with similar termination clauses in its proxy
statement or public release?
- What evidence exists that the GNL Board leveraged this specific
termination feature in the Advisory Agreement during the
internalization negotiation?
- 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:
- What was the GNL Board's process for considering the RTL
merger?
- Is the Merger necessary to internalize the management of
GNL?
- Will GNL publicly commit to implementing the Merger's
governance enhancements, regardless of the Merger vote
outcome?
- 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
GNL.OrangeCap@gmail.com
Media Contacts
ASC Advisors
Taylor Ingraham / Steve Bruce
tingraham@ascadvisors.com / sbruce@ascadvisors.com
203-992-1230
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SOURCE Orange Capital Ventures, LP