Shares of real estate investment trust (REIT) Weingarten Realty (NYSE:WRI) rose 11% out of the gate on April 15. The big news driving the advance was the announcement that Kimco (NYSE:KIM) and Weingarten plan to merge.
Although billed as a merger, Kimco is really buying its shopping center peer. Investors will receive 1.408 shares of Kimco stock for each share of Weingarten they own plus a cash payment of $2.89 per share. The total consideration, based on Kimco's closing price on April 14, is $30.32 per share. Weingarten stock basically rose up toward that figure today.
Assuming the deal is consummated as expected, current Kimco investors will own 71% of the combined company, with the remainder owned by former Weingarten shareholders. The hope is that the new company will benefit from increased scale and a sizable collection of growth-oriented internal redevelopment projects. The combined entity will also have notable exposure to the Sunbelt, which is expected to benefit from continued population growth in the future.
The deal is expected to close in the second half of 2021 and, based on the agreement outlined in the news release, the two stocks will probably trade in lock step until the merger/acquisition is closed. So the big question for Weingarten shareholders is whether or not they want to end up as Kimco shareholders. If the answer is no, then it might make sense to capture the gains here today. That said, there's ample time to make a final call. Long-term investors will probably want to read through the conference call discussing this deal and maybe even listen to the next quarterly calls for each of these REITs before deciding.