Shares of American Financial rose $1.08, or 16.7 percent, to $7.53 in over twice its average trading volume.

Gramercy, a commercial real estate specialty finance company, will acquire American Financial for $5.50 per share in cash and 0.12096 shares of its stock.

Banc of America Securities analyst Mitchell B. Germain said the take-out price is 30 percent below where the stock traded less than nine months ago.

"This is an indication to us that private market pricing for net lease assets has clearly changed," Germain wrote in a client note.

Germain said the company's other options were limited, even though American Financial already repositioned its portfolio by selling $2 billion in assets.

Germain, who kept a "Neutral" rating on the stock, said shares have underperformed others in the sector due to poor growth prospects and sentiment over its exposure to the financial services industry.