Stock Update (NYSE:AFCO): American Farmland Co Announces Merger With Farmland Partners

American Farmland Co (NYSEMKT:AFCO) and Farmland Partners (NYSE:FPI) jointly announced that they have entered into a definitive agreement pursuant to which FPI has agreed to acquire all of the outstanding common stock of AFCO in a stock-for-stock transaction.

The combined company will be the largest public farmland REIT in the nation spanning more than 133,000 acres across 16 states, along both Coasts, the Midwest, the Plains and the Delta. The merger brings together two highly complementary leading farmland portfolios. FPI’s assets are comprised primarily of premier row crop farmland, while AFCO’s portfolio is concentrated in high-quality specialty and permanent crop farms across the U.S.  On a consolidated basis, the combined company’s portfolio is expected to consist of approximately 75% row crop farmland and 25% specialty crops by value. FPI expects to consolidate AFCO’s operations into FPI’s existing Denver-based headquarters and to realize significant cost synergies through eliminating duplicate administrative and other public company costs.

Paul A. Pittman will continue as FPI’s Chairman and CEO. D. Dixon Boardman and Thomas S. T. Gimbel, AFCO’s Chairman and CEO, respectively, will join FPI’s Board of Directors.

Commenting on the merger, Paul Pittman, FPI Chairman and CEO, said, “FPI’s acquisition of these great assets assembled by AFCO will strengthen FPI’s role as the leading public farmland real estate platform in the U.S. This merger will significantly increase FPI’s diversification across crops and geographies. Thanks to increased scale, we also expect to realize a reduction in overall costs as a percentage of portfolio value, creating superior value for our and AFCO’s stockholders and our respective farmer partners.”

Thomas S.T. Gimbel, AFCO’s Chief Executive Officer, commented, “We believe this opportunity to join FPI’s robust platform presents a meaningful opportunity to our stockholders. As the end result of a thorough process we commenced in April of this year, we are confident that the complementary nature of this transaction will accomplish our goal of enhancing stockholder value while preserving our core principles and continuing to execute on our vision for a scalable institutional, well-diversified and high-quality portfolio of farmland assets.”

Under the terms of the Agreement, each share of AFCO common stock and each AFCO operating partnership unit will be converted into the right to receive 0.7417 shares (or units) of newly issued FPI common stock (or units). On a pro-forma fully diluted basis, following the merger, former FPI equity holders will hold approximately 65% of the combined company’s equity, and former AFCO equity holders will hold approximately 35%. The stock-for-stock merger is intended to qualify as a tax-free reorganization. The transaction is subject to customary closing conditions, including receipt of the requisite approval of both FPI and AFCO stockholders.

Both company’s boards of directors have approved the transaction and recommend the transaction for approval by their respective stockholders. The parties currently expect the transaction to close in the later part of this year or early during the first quarter of 2017.

Strategic Benefits

Upon consummation of the merger, FPI will significantly increase its scale and improve the quality and diversification of its portfolio while expanding its market presence in key farming regions across the U.S., which is expected to result in strategic and financial benefits for stockholders:

  • Larger, More Diversified Portfolio of High-Quality Assets: The combined company’s portfolio is expected to be comprised of institutional-quality farmland assets located in key farming regions in 16 states around the U.S. along both Coasts, the Midwest, the Plains and the Delta. The portfolio will also be diversified by crop type, with approximately 75% of the portfolio (by value) to be comprised of row crop farmland and approximately 25% of the portfolio to be comprised of specialty and permanent crops.
  • Increased Scale: The combined company is expected to maximize operational efficiencies and lead to significant cost savings resulting from consolidating overhead expenses into FPI’s existing operations.  The increased scale of the combined enterprise is also expected to provide an enhanced platform to pursue accretive acquisitions in row, specialty and permanent crop farmland across a wider geographic footprint.
  • Reinforces FPI’s Position as the Leading Farmland REIT: The acquisition of AFCO further reinforces FPI’s position as the largest, most diversified and most liquid public farmland REIT.
  • Increased Revenues: On a pro-forma basis, the transaction is expected to contribute approximately $16 million of revenue in 2016, increasing FPI’s total revenue from $26 million to approximately $42 million.
  • Transaction Accretion to both AFCO and FPI Stockholders: The transaction is expected to be approximately 10% accretive to FPI’s AFFO per share in 2017 growing to 20% accretive as synergies are fully realized.
  • Greater Access to Capital: After giving effect to the transaction, the combined company is expected to have a fully-diluted market cap of approximately $400 million. The size and scale of the combined company is expected to provide greater access to global investors targeting investments in U.S. farmland assets.


Paul A. Pittman, FPI’s Chief Executive Officer and Chairman of FPI’s Board of Directors, will serve as Chief Executive Officer and Chairman of the Board of Directors of the combined company. Luca Fabbri will remain CFO of the combined company. Additionally, Robert L. Cowan is expected to join FPI as President upon completion of the transaction. Upon consummation of the transaction, the number of directors comprising FPI’s Board of Directors will be increased from six to eight, of which two directors from AFCO, its Chairman and its CEO, have been designated by AFCO from its existing Board of Directors and will be elected to the FPI Board.


Robert W. Baird & Co. acted as financial advisor and Morrison & Foerster LLP and Venable LLP acted as legal advisors to FPI. Citigroup Global Markets Inc. and Raymond James & Associates, Inc. acted as financial advisors and Goodwin Procter LLP acted as legal advisors to AFCO. (Original Source)

Shares of American Farmland are up nearly 21% to $7.31 in early trading. AFCO has a 1-year high of $8.00 and a 1-year low of $4.95. The stock’s 50-day moving average is $6.00 and its 200-day moving average is $6.19.

On the ratings front, American Farmland has been the subject of a number of recent research reports. In a report released today, Janney Montgomery Scott analyst Robert Stevenson downgraded AFCO to Hold. Separately, on August 24, Oppenheimer’s Steve Manaker reiterated a Buy rating on the stock and has a price target of $8.50.

According to, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Robert Stevenson and Steve Manaker have a total average return of 16.1% and 17.4% respectively. Stevenson has a success rate of 70.0% and is ranked #551 out of 4124 analysts, while Manaker has a success rate of 81.2% and is ranked #21.

American Farmland Co. engages in the production and trade of agricultural products. It operates through the following segments: Permanent Crop, Specialty/Vegetable Row Crop, Commodity Row Crop, and Development. The Permanent Crop segment leases out vineyards, ranches, and farms which grows walnuts, pecans, almonds, wine grapes, and pistachios. The Specialty/Vegetable Row Crop segment rents out the company’s Sandpiper Ranch and Sweetwater Farm properties with strawberries and vegetables. The Commodity Row Crop segment produces corn, soybeans, cotton, and rice in their leased farms and plains.


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