Realty Income Corp. and American Realty Capital Trust Inc. have signed a definitive agreement under which Realty Income will acquire all of the outstanding shares of American Realty Capital Trust in a transaction valued at approximately $2.95 billion.

The boards of directors of both companies have unanimously approved the agreement. Following a shareholder vote by both companies, the transaction is expected to close during the fourth quarter of 2012 or early in the first quarter of 2013.

The acquisition will be financed by Realty Income directly issuing $1.9 billion of its common stock to American Realty Capital Trust shareholders, the assumption of approximately $526 million of debt, and the immediate repayment of approximately $574 million of outstanding debt and transaction expenses.

Under the terms of the agreement, American Realty Capital Trust shareholders will receive a fixed exchange ratio of 0.2874 Realty Income shares for each share of American Realty Capital Trust common stock that they own. Based on Realty Income’s closing stock price of $42.48 on September 5, 2012, this consideration would be equivalent to $12.21 per share. Upon closing of the transaction, American Realty Capital Trust shareholders are expected to own approximately 25.6 percent of Realty Income’s shares.

“This acquisition comprehensively advances Realty Income’s strategic objectives of increasing its revenue generated by investment grade tenants and further diversifying its portfolio outside of the retail industry,” Realty Income CEO Tom A. Lewis said in a statement. “This transaction is immediately accretive and is expected to generate approximately $0.20-$0.22 per share in additional Funds from Operations (FFO) annually and, upon closing, is expected to allow us to increase our annualized dividends to shareholders by approximately $0.13 per share to an annualized rate of approximately $1.94 per share.”

“We are very pleased to announce this transaction between ARCT and Realty Income,” American Realty Capital Trust Chairman Nicholas S. Schorsch said in a statement. “Realty Income has an extraordinary record of continuous dividend payments and dividend growth together with very strong overall performance. This transaction will institutionalize the notion of durable, defensive dividends for our shareholders by allowing them to become owners on a very favorable basis of the largest, and, I believe, now the best, publicly-traded net lease real estate company, period. Size, low-cost capital, and management skill are the competitive advantages in the net lease sector.”