Business Context and Reporting Period
Company: Digital Realty Trust, Inc. (DLR) and Digital Realty Trust, L.P.
Filing Type: Form 8-K (Current Report)
Date of Report: June 8, 2017
Event: Entry into a Material Definitive Agreement (Merger Agreement) with DuPont Fabros Technology, Inc. (DuPont).
Key Financial Metrics
This filing is a current report regarding a corporate transaction and does not contain periodic financial statements (e.g., revenue, profit, cash flow, or margins) for the reporting period. The filing text does not provide a clear value for operational financial metrics.
Transaction-Specific Financial Terms:
- Exchange Ratio: 0.545 shares of DLR Common Stock for each share of DuPont Common Stock.
- Preferred Stock Conversion: One-for-one exchange of DuPont 6.625% Series C Preferred Stock for a new class of DLR 6.625% Series C Preferred Stock.
- Termination Fees:
- DuPont to pay DLR: $150 million (under certain termination circumstances).
- DLR to pay DuPont: $300 million (if DLR fails to consummate the merger or changes its recommendation).
Material Changes and Transaction Structure
On June 8, 2017, DLR and DuPont entered into an Agreement and Plan of Merger. The transaction involves two simultaneous mergers:
- REIT Merger: DuPont will merge into a DLR subsidiary (Merger Sub), with Merger Sub surviving.
- Partnership Merger: A DLR subsidiary will merge into the DuPont Operating Partnership, with the DuPont Operating Partnership surviving.
Both boards of directors unanimously approved the transaction and recommended it to their respective stockholders. The transaction is structured as a stock-for-stock exchange with no cash consideration for common shareholders.
Guidance, Outlook, Risks, and Contingencies
Conditions to Closing: The merger is subject to customary conditions, including:
- Approval by a majority of DuPont and DLR stockholders.
- Effectiveness of a registration statement on Form S-4.
- NYSE listing approval for new DLR shares.
- Absence of material adverse effects on either party.
- No financing conditions are required.
Risks and Contingencies:
- Competing Proposals: DuPont is restricted from soliciting competing proposals but may terminate the agreement to accept a "Superior Proposal" prior to stockholder approval, subject to paying a termination fee.
- Integration Risks: Forward-looking statements highlight risks regarding integration costs, business disruption, and the realization of synergies.
- Regulatory and Legal: Risks include failure to obtain required approvals or legal impediments to consummation.
Outlook: Management believes the transaction is advisable and in the best interests of stockholders. No specific financial guidance for the combined entity is provided in this filing.
Key Facts for Investor Verification
- Verify the final exchange ratio of 0.545 DLR shares per DuPont share and its impact on DLR's diluted earnings per share.
- Confirm the status of the Form S-4 registration statement and the scheduled dates for stockholder votes.
- Review the full Merger Agreement (Exhibit 2.1) for specific representations, warranties, and the definition of "Superior Proposal."
- Assess the $300 million reverse termination fee exposure for DLR if the deal fails due to DLR's actions or failure to close.
- Monitor the integration plan and potential tax implications arising from the assumed Tax Protection Agreement.