RCS Capital (RCAP) said it has settled litigation brought by sister company American Realty Capital (ARCP), spending almost $60 million to terminate its deal to purchase Cole Capital Advisors.
RCS Capital said it settled litigation brought by ARCP last month in Court of Chancery of the State of Delaware regarding the $700 million Cole Capital acquisition. RCAP called off the deal to purchase non-traded REIT sponsor Cole Capital, after ARCP announced a $23 million accounting error. ARCP responded, “RCS has no right and there is absolutely no basis for RCS to terminate the agreement.”
RCS Capital reached an agreement Thursday by negotiating a break-up fee consisting of a cash payment of $32.7 million and a $15.3 million, two-year promissory note, as well as agreeing to allow ARCP to retain the $10 million payment delivered by RCS Capital in connection with the first closing. Additionally, the terms of the settlement release ARCP from its obligation to pay $2 million to RCS Capital in respect of structuring services provided by Realty Capital Securities.
Michael Weil, CEO of RCS Capital, said the settlement was in the best interests of the company’s stakeholders. “We believe the negotiation of a fixed-cost settlement clearly outweighs the potential expense and distraction of a drawn-out litigation process, enabling us to focus on the execution of our proven business strategy,” he said.