Store Is Getting Acquired – Now What?
The hot-of-the-press Store Capital Buyout rattles many REIT investors.
$STOR, a U.S. based-commercial real estate investment trust, is one of my favorite holdings in my All-Weather Dividend Portfolio. It was just reported on Sep 15, 2022, that the management has agreed to be acquired by GIC & Oak Street in an all-cash transaction at $32.25 per share, representing a premium of 20% to STORE Capital’s closing stock price as of September 14, 2022.
Key Takeaways
☑️ Store is being acquired by GIC & Oak Street for $14 Bio USD
☑️ Shareholders get $32.25 US/share, inclusive of a 20% premium
☑️ The deal is expected to be completed in Q1/2023
☑️ Nothing is 100% final yet, Store can explore other bids
Your Store Capital Buyout Questions – Answered.
$STOR is one of my top 20 positions, hence I have a natural interest this goes down well. I have shared in length why I believe this is my dream REIT stock, supported by the fact that it is one of the only REITs Warren Buffett’s Berkshire Hathaway owns (see 2017) as well.
1/ Who are the buyers, GIC and Oak Street?
GIC (website) is one of the three investment vehicles of Singapore, managing the government’s financial assets. The other two bodies are called the Monetary Authority of Singapore (MAS) and of course Temasek. GIV invests assets for the long term to preserve and improve the international purchasing power of the funds it administers.
Oak Street Capital (website), with $16,6 Bio US in assets under management and 1,200 owned properties, is a prominent real estate investor, owned by Blue Owl, another large capital group providing permanent/long-term capital solutions via its three subsidiaries: Dyal Capital, Owl Rock, and the above-mentioned Oak Street. Blue Owl just recently acquired Oak Street in 2021.
2/ Why do GIC and Oak Street want to do the Store Capital buyout?
The buyers primarily see value in the asset Store Capital owns, and further value appreciation potential. The management of $STOR is often titled as one of the best operating teams in the entire real estate sector, making it a highly attractive M&A target for institutional buyers like GIC or Oak Street.
3/ I am a shareholder – what do I need to do now?
As a $STOR shareholder, we don’t need to do anything at this stage. The stock price was at roughly $27 US on Sep 14, and the offer would buy us out at $32.25 US. The share price is currently sitting at $32.25 US, slightly below the buy-out price. As shareholders, we now just need to stay put and wait. The management has secured a “Go-Shop Provision”, allowing the company to explore alternative bids.
4/ How about the Timing of the Store Capital Buyout?
The STORE Capital Board of Directors unanimously approved the transaction, which will close in the first quarter of 2023, subject to approval by all Store Capital’s shareholders.
5/ Is it a done deal, or can Store Capital look for better offers?
STORE Capital and its representatives may actively seek and consider acquisition proposals during what is called a ‘Go-Shop’ period. Despite the fact that this process cannot be assured to produce a better outcome, we just need to give the board of directors time to check with potential other parties.
6/ Might we see an even better buyout price?
Yes, in the ‘Go-Shop’ period, the $STOR management may go out and see alternative offers. If a superior offer can be found, typically the suitors, in this case, GIC and Oak Street, can adjust their bid. In other words, the price of the Store Capital buyout deal can be adjusted.
7/ What other REITs were bought out?
There are many examples, some noteworthy ones include Blackstone’s acquisition of Starwood Capital, in which in July 2018, Blackstone paid $6.3 billion for the 62,000-key Extended Stay America portfolio, one of the biggest real estate deals of the Covid era. The deal valued the country’s largest lodging REIT at $20.5 per share. Or In a deal valued at $7.6 billion, including debt, Wall Street Journal reported that Blackstone bought PS Business Parks, a suburban office REIT on Monday. The Store Capital buyout deal is similar, but such deals are never identical.
8/ What will happen to Store Capital’s stock price?
Via the Store Capital buyout offer, we as shareholders now have an offer of $32.25 USD on the table. What usually happens is that the stock price will gravitate towards or around that price level. You won’t find many shareholders willing to sell their shares for less than that, and you won’t find many potential buyers willing to pay more than that. When looking at STOR’s stock chart, we can see that the price instantly gravitated to the bid/offered price.
Conclusion
The Store Capital Buyout really comes out of nowhere. As a shareholder owning shares in $STOR, we shall remain calm and sit tight. No need to do anything at the moment. A good and fair buyout offer is on the table, representing a 20% premium over the last closing price. Personally, I saw $STOR as a dream REIT stock I wanted to buy and hold forever in my All-Weather Portfolio, but this might not be possible anymore after all.
Age when reaching FI: 40 in 2018
Left the rat race: May 2017
Living in: Singapore
Number of kids: 2
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