Farmland Partners Inc. (NYSE: FPI) said Sept. 12 that it will acquire American Farmland Co. (NYSE: AFCO) in a stock-for-stock deal.
Farmland Partners’ Paul Pittman will continue as chairman and CEO of the new company, which will own more than $850 million of U.S. farmland assets spanning 133,000 acres.
The transaction is expected to contribute approximately $16 million of revenue in 2016, increasing Farmland Partners’ total revenue from $26 million to approximately $42 million.
The terms of the deal state that each share of American Farmland common stock and each American Farmland operating partnership unit will be converted into the right to receive 0.7417 shares or units of newly issued Farmland Partners common stock or units. Based on Farmland Partners’ closing share price of $11.10 on Sept. 9, American Farmland shares would be valued at $8.23.
Following the merger, former Farmland Partners equity holders will hold approximately 65 percent of the merged company, and former American Farmland equity holders will hold the remaining 35 percent.
In a conference call, Pittman said the merger will significantly increase Farmland Partners’ diversification on a crop and geographic basis and will reduce overall operating costs. He described the merger as a step toward the goal of “aggressively” growing the company. He added that the company expects to continue to acquire farmland in core farming regions.
The combined company projects to have a fully diluted market capitalization of approximately $400 million. The size and scale of the new company should provide greater access to global investors targeting investments in U.S. farmland assets, according to Pittman.
David Rodgers, a senior analyst at Robert W. Baird & Co., said Farmland Partners is expected to operate its combined portfolio more efficiently, “and with added scale, we think that the combined company will offer investors a substantially more effective way to invest in farmland long term.”
Once combined, the portfolio is expected to consist of approximately 75 percent row crop farmland and 25 percent specialty and permanent crops, based on the value of the assets.