Denver, Colorado-based Farmland Partners Inc. (NYSE: FPI) agreed to acquire New York-based American Farmland Co. (NYSE MKT: AFCO) in a stock-for-stock merger, based on a combined company value of $400 million. Following the merger, FPI shareholders will hold 65% of the combined company, and former AFCO shareholders will hold 35%, implying a sale price of $140 million.
The combined company will be the largest public farmland REIT in the nation spanning more than 133,000 acres across 16 states, along both Coasts, the Midwest, the Plains and the Delta.
In April, AFCO had retained Citigroup and Raymond James as its financial advisors and Goodwin Procter LLP as legal counsel to assist in a review of strategic alternatives, including a merger or sale of the company, as reported by ExitHub.
The merger brings together two complementary farmland portfolios. FPI’s assets are comprised primarily of row crop farmland, while AFCO’s portfolio is concentrated in specialty and permanent crop farms across the U.S. On a consolidated basis, the combined company’s portfolio is expected to consist of approximately 75% row crop farmland and 25% specialty crops by value.
“This merger will significantly increase FPI’s diversification across crops and geographies,” said FPI chairman and CEO Paul Pittman, who will remain in his current role after the closing. He is a successful agribusiness and former high-tech entrepreneur, with over a decade of previous investment banking and head of M&A experience at ThinkEquity Partners, Merrill Lynch and Wasserstein Perella.
“We are confident that the complementary nature of this transaction will accomplish our goal of enhancing stockholder value,” said AFCO’s CEO Tom Gimbel, who will join FPI’s board after the closing, together with AFCO’s chairman D. Dixon Boardman.
Each share of AFCO common stock and each AFCO operating partnership unit will be converted into the right to receive 0.7417 shares or units of newly issued FPI common stock or units. The merger is intended to qualify as a tax-free reorganization.
Both company’s boards of directors have approved the transaction and recommend the transaction for approval by their respective stockholders. The deal is subject to customary closing conditions, and is expected to close late this year or early next year. AFCO’s operations are expected to be consolidated into FPI’s Denver-based headquarters.
The deal is expected to contribute $16 million of revenue in 2016, increasing FPI’s total revenue from $26 million to $42 million, and is expected to be 10% accretive to FPI’s AFFO per share in 2017, growing to 20% as synergies are fully realized.
AFCO was founded in 2009 by a team of New York tycoons and global investment professionals across the agriculture, real estate, and alternative investment industries: D. Dixon Boardman (chairman of Optima Fund Management), Harrison T. LeFrak (vice chairman and managing director of the LeFrak Organization), Alfonso and J. Pepe Fanjul (owners of Florida Crystals Corp.), and William von Mueffling (head of Cantillon Asset Management).
Photo: Dixon and Arriana Boardman, at The Society of Memorial Sloan Kettering’s Special Projects Annual Dinner, October 9, 2014. (Patrick McMullan Company)