STORE Capital to Be Acquired in an All-Cash Transaction; What it Means for Income Investors

Shares of STORE Capital have soared today by around 20% on news the REIT has accepted an acquisition offer from the Singaporean sovereign fund GIC and Oak Street in an all-cash deal valued at about $14 billion.

STORE Capital shareholders will receive $32.25 per share when the deal closes sometime in the first quarter of next year. This all-cash offer represents a 20% premium to yesterday's closing price.

Over the next 30 days, STORE is permitted to consider competing offers before the terms of the deal lock in, and then the outcome becomes wholly dependent on a positive vote from stockholders.

Because financing conditions have grown less accommodative this year, M&A activity has slowed and suggests there won't be many competing acquisition offers, if any. 

It's also worth noting that Warren Buffett's Berkshire Hathaway cut its stake in STORE in half last quarter, implying the Oracle of Omaha is not interested in making a bid at current valuation levels.

Since the transaction has so few roadblocks, the deal should close as expected early next year.

Until then, shareholders will receive one final regular dividend payment, after which the payout will be suspended. And the stock should trade in a narrow range around the $32.25 acquisition price until the transaction is closed.

For investors worried about falling stock prices this fall as economic uncertainties continue to weigh on the markets, holding STORE shares until the transaction closes could provide some downside protection.

That said, the stock has limited upside outside the last regular dividend payment, which will amount to a 1.1% yield until the transaction closes.

Either way, shareholders need to start considering replacement options for STORE. For those interested in continuing to hold a retail REIT, Realty Income (O), National Retail Properties (NNN), and Federal Realty (FRT) all offer similar payouts and boast Safe Dividend Safety Scores.

In light of this acquisition news, we are dropping STORE Capital from our Dividend Safety Score coverage. The retail REIT had maintained a Safe Dividend Safety Score.

We will continue to monitor for updates on the STORE transaction and provide updates if needed.

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