newswire.ca
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CHIP REIT trustees recommend rejection of revised Royal Host offer
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VANCOUVER, July 16 /CNW/ - Canadian Hotel Income Properties
Real Estate Investment Trust
HOT.un
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Canadian Hotel Income Properties Real Estate Investment Trust (``CHIP
REIT') today announced that its Board of Trustees is recommending unitholders
reject the revised hostile takeover bid from Royal Host Real Estate Investment
Trust. This recommendation is supported by the opinion of TD Securities Inc.,
the financial advisor to CHIP REIT's Special Committee of Trustees, that the
offer is inadequate from a financial point of view.
``Royal Host's intention to sell nine of CHIP REIT's premium hotels at
discount prices makes this offer no more attractive than the original offer
that was rejected by CHIP REIT unitholders last week,' said Rhys Eyton,
Chairman, President and CEO of CHIP REIT. ``We urge CHIP REIT unitholders not
to tender their units to the revised Royal Host offer and we continue to
consider other alternatives.'
In making their recommendation, the Trustees considered all aspects of
the offer and identified a number of factors indicating that the offer is not
in the best interests of CHIP REIT unitholders.
1. The offer does not provide a clear enhancement of value to CHIP REIT
unitholders.
2. In order to finance the cash component of the offer, Royal Host
proposes to sell, at a discount, a large number of CHIP REIT's
branded upscale hotels, in effect providing a cash distribution to
CHIP REIT unitholders through the sale of their own assets.
3. The offer, particularly through the sale of nine CHIP REIT hotels,
represents a significant departure from CHIP REIT's strategy of
focusing on upscale, full-service branded hotels - as the new entity
would have a portfolio with 69% of its guestrooms in hotels
categorized as ``lower mid-price' or lower.
4. A combination with Royal Host and the proposed sale of CHIP REIT
hotels would result in a REIT that is not substantially larger than
CHIP REIT, with a weaker balance sheet and reduced financial
resources for growth.
5. The entitlement of unitholders to receive cash instead of Royal Host
units under the offer is highly conditional.
A Trustees' circular is being mailed to all CHIP REIT unitholders
detailing the Trustees' recommendation and the reasons for it, which includes
the supporting opinion from TD Securities Inc.
CHIP REIT was Canada's first hotel real estate investment trust and has a
focus on mid-market and upscale full-service hotels. Through upgrades,
repositioning and franchising, CHIP REIT and its wholly owned hotel manager,
CHIP Hospitality, improve the operating performance of the properties within
the portfolio to create value for investors. CHIP REIT currently owns and
operates 36 hotels with close to 8,000 rooms across Canada. CHIP REIT units
trade on The Toronto Stock Exchange under the symbol HOT.un.
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For further information: Kevin Grayston, Executive Vice President &
Chief Financial Officer (604) 685-0011, Fax (604) 685-0019, www.chipreit.com <http://www.chipreit.com> |
