STIFEL: FPI ($11.10, Buy) - FPI Merging with AFCO

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FULL REPORT

FPI Merging with AFCO

FPI Merging with AFCO. This morning, Farmland Partners Inc. (FPI, $11.10, Buy) announced that it was merging with American Farmland Company (AFCO, $6.04, Not Covered). FPI will become the largest and most diversified public Farmland REIT. The transaction will close later this year or early 2017. In mid-April AFCO announced that it was exploring strategic alternatives.
 
 
  • Combined Portfolio. The transaction will give FPI a bigger and more diversified portfolio. The merged entity will own more than 133,000 acres (293 farms) in 16 states throughout the Midwest, the Plains, the Delta, and on the coasts. 74% of the portfolio will be row crops and 26% specialty crops.
 
  • Larger Enterprise. The company will have an enterprise value over $850 million, will somewhat de-lever FPI, and provide synergies. Pro forma 2016 revenue increases from $26 million to $42 million.
 
  • Accretive to 2017 AFFO. The merger will be 10.0% accretive to 2017 AFFO and could be as high as 20.0% accretive post synergies.
 
  • Management Team. FPI's CEO and chairman, Paul A. Pittman, will remain in his role as well as CFO Luca Fabbri. Robert L. Cowan will come aboard as president when the merger closes. AFCO's CEO Thomas S. T. Gimbel and chairman D. Dixon Boardman will join FPI's board.