AFIN’s Board Recommends Rejection of MacKenzie July 26 Tender Offer

August 1, 2018 | James Sprow | Blue Vault

American Finance Trust (“AFIN”), Inc.’s board of directors announced on August 1 that it strongly recommends that its shareholders reject the latest unsolicited tender offer by MacKenzie Realty Capital, Inc. (“MacKenzie”) to purchase up to 400,000 shares of each class of AFIN common stock.

Blue Vault previously reported that on July 25, 2018, MacKenzie sent a tender offer to shareholders of AFIN that offers $15.00 per share for the Nasdaq-listed Class A shares, $11.27 for Class B-1 shares and $10.00 for Class B-2 shares. The Class B-1 and Class B-2 shares do not convert to Class A shares and become listed for 90 and 180 days, respectively, from the initial listing on July 19, 2018. The tender offer expires on September 10, 2018.

AFIN opened trading on August 1, 2018, at $14.75 per share. Since listing on July 19, the stock has traded as high as $16.80 and as low as $13.15 per share. The REIT announced that it will release its financial results for Q2 2018 on August 9, 2018.

AFIN’s board called the offer an “opportunistic attempt to profit at stockholders’ expense.” The board believes that the offers for the three different share classes “could well prove to be undervalued.” In the press release, the board also stated that the offer price was deceptive since MacKenzie will reduce the actual price paid for tendered shares by any distributions paid on such shares by AFIN after June 29, 2018, which, after the June 2018 distributions paid in early July at the annualized rate of $1.30 per share, are currently paid at the rate $1.10 per year per share. As a result, the per share price actually paid by MacKenzie will be at least $0.29 less than their offer price if MacKenzie’s offer expires on September 10, 2018.

AFIN’s board also states that MacKenzie’s offer has not been publicly filed and avoids important investor protections and disclosure. “The MacKenzie offer avoids important investor protections, including accepting tenders only on a first come, first served basis with no right to withdraw or rescind a tender, even if the MacKenzie offer is extended. As a result, once MacKenzie receives it, a tender is irrevocable.”

According to AFIN’s press release, unlike tender offers filed with the SEC, the MacKenzie offer does not address certain matters, including:  a complete description of the risks associated with the offer, a clear discussion of the methodologies used by MacKenzie to determine its offer price or how it has valued AFIN shares, along with disclosures of MacKenzie’s control persons and promoters and their financial wherewithal. 

Sources: SEC, Blue Vault

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