What happened
Shares of RPT Realty (RPT) were up 18.8% as of 11:50 a.m. ET Monday, according to data provided by S&P Global Market Intelligence, after the company agreed to be acquired by Kimco Realty Corporation (KIM -0.22%). Shares of Kimco were also up modestly on the news.
So what
In a press release early this morning, RPT Realty announced it has agreed to be acquired by Kimco Realty in an all-stock transaction valued at roughly $2 billion, including the assumption of debt and preferred stock. Per the terms of the agreement, RPT investors will receive 0.6049 of a newly issued Kimco share for each RPT share they own, equating to roughly $11.34 per RPT share based on Kimco's closing price on August 25, 2023 -- a roughly 19% premium to RPT's closing price on Friday.
Now what
The combination of the two leading real estate investment trusts (REITs) will create a consolidated entity with a pro forma equity-market capitalization of around $13 billion, and a total enterprise value of roughly $22 billion. Assuming the transaction closes as planned around the beginning of 2024 -- and noting it's still subject to RPT shareholder approval and other normal closing conditions -- Kimco shareholders and RPT investors will own around 92% and 8% of the combined company, respectively.
Kimco CEO Conor Flynn stated that around 70% of RPT's portfolio aligns with Kimco's key strategic markets, adding that the merger should be immediately accretive to Kimco's funds from operation (FFO) upon closing.
In the end, this deal makes a great deal of strategic sense, and there appears to be little doubt it will go through as planned. Given the all-stock nature of the deal, RPT stock will trade in tandem with the movements of Kimco until the merger closes. RPT shareholders, for their part, can either sell now and put that money to work elsewhere, or wait for the deal to close and receive the agreed-upon shares of Kimco instead.
