Item 1.01.
Entry into a Material Definitive Agreement.
On September 12, 2016, Farmland Partners Inc. (the Company), Farmland Partners Operating Partnership, LP (the Operating Partnership), Farmland Partners OP GP LLC (the General Partner), FPI Heartland LLC (Parent Merger Sub), FPI Heartland Operating Partnership, LP (OP Merger Sub) and FPI Heartland GP LLC (OP Merger Sub GP and together with the Company, the Operating Partnership, the General Partner, Parent Merger Sub and OP Merger Sub, the FPI Parties) entered into an Agreement and Plan of Merger (the Merger Agreement) with American Farmland Company (AFCO) and American Farmland Company L.P. (AFCO OP and, together with AFCO, the AFCO Parties). The Merger Agreement, the Mergers (as defined below) and the other transactions contemplated by the Merger Agreement were unanimously approved by the Companys Board of Directors.
Pursuant to the terms of the Merger Agreement, subject to the satisfaction or waiver of certain conditions set forth in the Merger Agreement:
·
OP Merger Sub will be merged with and into AFCO OP (the Partnership Merger) at the effective time of the Partnership Merger (the Partnership Merger Effective Time), whereupon the separate existence of OP Merger Sub will cease and AFCO OP will be the surviving entity and a subsidiary of Company and OP Merger Sub GP, with OP Merger Sub GP serving as its general partner; and
·
AFCO will be merged with and into Parent Merger Sub (the Company Merger and, together with the Partnership Merger, the Mergers) at the effective time of the Company Merger (the Company Merger Effective Time), whereupon the separate existence of AFCO will cease and Merger Sub will be the surviving entity and a wholly-owned subsidiary of the Company.
At the Company Merger Effective Time, each share of common stock of AFCO, par value $0.01 per share (AFCO Common Stock), issued and outstanding immediately prior to the Company Merger Effective Time (other than any shares of AFCO Common Stock owned by any wholly owned subsidiary of AFCO or by any FPI Party or any of their respective wholly owned subsidiaries), will be automatically converted into the right to receive, subject to certain adjustments, 0.7417 shares of Company Common Stock (as defined below) (the Company Merger Consideration).
In addition, in connection with the Company Merger, each outstanding AFCO restricted stock unit that has become fully earned and vested in accordance with its terms will, at the Company Merger Effective Time, be converted into the right to receive the Company Merger Consideration.
At the Partnership Merger Effective Time, each common unit of limited partnership interest in AFCO OP (AFCO OP Units) issued and outstanding immediately prior to the Partnership Merger Effective Time, will be converted automatically into the right to receive, subject to certain adjustments, 0.7417 Class A common units of limited partnership interest (Company OP Units) in the Operating Partnership (the Partnership Merger Consideration and, together with the Company Merger Consideration, the Merger Consideration).
The FPI Parties and the AFCO Parties have made certain customary representations and warranties in the Merger Agreement and have agreed to customary covenants, including with respect to the conduct of business prior to the closing and covenants prohibiting the FPI Parties and the AFCO Parties from soliciting, providing non-public information or entering into discussions or agreements concerning proposals relating to alternative business combination transactions, subject to certain limited exceptions.
The Company will be permitted to pay its regular quarterly dividend in an amount not to exceed $0.1275 per share, and AFCO will be permitted to pay its regular quarterly dividend in an amount not to exceed $0.0625 per share.
Pursuant to the Merger Agreement, immediately following the Company Merger Effective Time, the size of the Companys Board of Directors will be increased to eight members, and Thomas S.T. Gimbel and D. Dixon Boardman will be elected to the Companys Board of Directors. Each of Messrs. Gimbel and Boardman is currently a member of the Board of Directors of AFCO.
2
The Mergers are subject to customary closing conditions including, among other things, (1) the approval of the issuance of shares of the Companys common stock, $0.01 par value per share (Company Common Stock), in connection with the Company Merger by the affirmative vote of a majority of the votes cast by holders of the Company Common Stock entitled to vote on the matter, (2) the approval of the Company Merger by the affirmative vote of holders of AFCO Common Stock representing a majority of the votes entitled to be cast on the matter, (3) the approval for the New York Stock Exchange listing of the shares of the Company Common Stock to be issued in the Company Merger, (4) the absence of any law, injunction, judgment, order or ruling prohibiting the Mergers, (5) the accuracy of the representations and warranties made by the parties (subject to customary materiality qualifications), (6) the performance by the parties in all material respects of their covenants, obligations and agreements under the Merger Agreement, (7) the delivery of tax opinions related to each of the Companys and AFCOs status as a real estate investment trust under the Internal Revenue Code of 1986, as amended (the Code), and (8) the delivery of tax opinions that the Company Merger will qualify as a reorganization within the meaning of Section 368(a) of the Code.
The Merger Agreement may be terminated under certain circumstances, including by mutual consent or by the Company or AFCO (1) if the other partys Board of Directors fails to support approval of the Merger, supports approval of a competing transaction, or willfully breaches its covenant not to solicit a competing transaction, (2) upon failure of either party to obtain stockholder approval, (3) if a final non-appealable order is issued prohibiting the Mergers, (4) if the Mergers have not been consummated on or before March 31, 2017, or (5) upon a material breach by the other party that would result in the failure of a closing condition to be capable of being satisfied before March 31, 2017. Additionally, each of the Company and AFCO may terminate the Merger Agreement in order to enter into an alternative transaction that is considered a superior proposal, following a prescribed process including a period of negotiation. In connection with the termination of the Merger Agreement for such reason and under other specified circumstances set forth in the Merger Agreement, the terminating party will be required to pay a termination fee of $6,000,000. Each of the Company and AFCO will bear its own expenses in the transaction; however, a party will be required to reimburse the expenses of the other party up to $1,000,000 in the event that one party, but not the other, has failed to obtain stockholder approval and the Merger Agreement has been terminated for that reason.
A copy of the Merger Agreement is attached hereto as Exhibit 2.1 and is incorporated herein by reference. The foregoing description of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Merger Agreement. The Merger Agreement has been attached to provide investors with information regarding its terms. It is not intended to provide any other factual information about the FPI Parties or the AFCO Parties. In particular, the assertions embodied in the representations and warranties in the Merger Agreement were made as of a specified date, are modified or qualified by information in confidential disclosure letters provided by each party to the other in connection with the signing of the Merger Agreement, may be subject to a contractual standard of materiality different from what might be viewed as material to stockholders, or may have been used for the purpose of allocating risk between the parties. Accordingly, the representations and warranties in the Merger Agreement are not necessarily characterizations of the actual state of facts about the Company and AFCO at the time they were made or otherwise and should only be read in conjunction with the other information that the Company makes publicly available in reports, statements and other documents filed with the Securities and Exchange Commission (the SEC).
Item 3.02. Unregistered Sales of Equity Securities
In connection with the execution of the Merger Agreement, on September 12, 2016, as described in Item 1.01 above (which is incorporated herein by reference), the Company has agreed to issue 2,425,022 Company OP Units in exchange for 3,269,556 AFCO OP Units upon consummation of the Partnership Merger. The Company OP Units may be tendered for redemption for cash or, at the Companys election, for shares of Company Common Stock in accordance with the terms of the Second Amended and Restated Agreement of Limited Partnership of the Operating Partnership, as amended. The issuance of the Company OP Units upon closing of the Partnership Merger will be exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the Securities Act).
3