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Cole REIT: $64 Million Settlement on Eve of Preliminary Injunction Hearing

Kessler Topaz served as Co-lead counsel in this shareholder class and derivative action, challenging the acquisition of real estate investment trust Cole Real Estate Investments, Inc. by fellow REIT American Realty Capital Properties, Inc.

Plaintiffs challenged the Cole directors’ decision to approve the acquisition or “internalization” of Cole’s external manager, which was owned by Cole insiders, as they alleged that it diverted potential merger consideration in the ARCP transaction from Cole’s public shareholders to the company’s insiders. After securing expedited proceedings, Kessler Topaz engaged in expedited discovery and sought to enjoin the multi-billion dollar transaction. The night before the preliminary injunction hearing was scheduled before the Court, Kessler Topaz reached agreement with defendants to settle the litigation, securing $64 million in value for Cole shareholders and providing for significant additional disclosures concerning the transaction so that Cole shareholders could make a fully informed decision on whether to approve the merger. Following the settlement and the close of the transaction, ARCP publicly disclosed massive accounting issues that affected the value of the stock portion of the consideration paid in the transaction. As a result, Kessler Topaz renegotiated the settlement agreement to ensure that Cole shareholders would not be foreclosed from pursuing additional remedies against ARCP in connection with their accounting issues that had reduced the value of the consideration paid to Cole shareholders in the merger.