Retail Properties stock surges after merger with Kite Realty values REIT at about $2.8 billion

Shares of Retail Properties of America Inc. RPAI, -1.45% surged 4.3% in premarket trading Monday, after the shopping center real estate investment trust and fellow REIT Kite Realty Group Trust KRG, -1.70% announced a merger agreement which values Retail Properties shares at a 12.6% premium, and implies a market capitalization for Retail Properties of about $2.8 billion. Kite Realty's stock was still inactive in premarket trading. Under terms of the deal, each Retail Properties share will be converted into 0.6230 newly issued Kite Realty shares. Based on Friday's stock closing prices, that values Retail Properties shares at about $12.98 each. "The financial benefits of the transaction include immediate earnings accretion, while maintaining a strong balance sheet," said Kite Realty Chief Executive John Kite. "This merger further demonstrates our conviction in open-air retail centers as essential shopping destinations and last mile fulfillment centers." The deal is expected to close during the fourth quarter of 2021. The combined company will have an portfolio of 185 open-air shopping centers, and will have an enterprise value of $7.5 billion. Shares of Retail Properties have run up 34.6% year to date and of Kite Realty have climbed 39.2%, while the SPDR Real Estate Select Sector ETF XLRE, +0.11% has rallied 26.5% and the S&P 500 SPX, -0.75% has advanced 15.2%.