A 200% Buyout Premium From Private Equity (ANL)

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American Land Lease Inc. (NYSE: ANL) is perhaps one of the more unusual plays seen yet in private equity acquisitions.  Despite a 200% premium, the more odd part of "for how much" is the "why"…..  American Land Lease Inc. stock closed at $3.90 yesterday, yet it has signed an agreement to be acquired by affiliates of Green Courte Partners for $14.20 per share.

The total deal is valued at $438 million when you include theassumption of debt and preferred stock.  But even after today’s 200%gains, the market cap of the stock is still only about $96 million.

This is a two-step acquisition via a cash tender offer by Green CourtePartners for all of the outstanding shares at $14.20 per share in cash,followed by a second-step cash-out merger where shares not acquired inthe offer will be converted into the right to receive the same cashprice per share.

As of the latest annual report, American Land Lease held interests asowner in 30 residential land lease communities that the company itselfrefers to as "innovative, resort-style communities for active adults."Its portfolio of residential land lease communities is located inFlorida, Arizona, and Alabama and includes:

  • a recreational vehicle park with an approximate total of 7,984 operational home sites;
  • 1,370 developed home sites;
  • 1,191 undeveloped home sites;
  • and 129 recreational vehicle sites.

The company is also a Real Estate Investment Trust, or REIT.  If youcan believe it, the company has been  increasing its land valueas "plant, property, and equipment" has risen for at least 3 quartersand sat at $424.24 million as of September 30.  As of that date it alsocarried $282.99 million in debt.

It seems that Green Courte is preparing to position itself with solidland values which may appreciate rapidly or which may have more demandthan traditional housing communities when the economy turns.  There isalso the argument that this could be better valued as asum-of-the-parts scenario, or at least in time that might be the case.

Even with shares at $12.52 and up over 200% today, the 52-week trading range is $1.85 to $22.89.

Jon C. Ogg
December 10, 2008