Good, bad or neutral news?
<snip>
www2.cdn-news.com
-
MAY 19, 1999 Royal Host REIT to Make Offer to Acquire Chip REIT CALGARY, ALBERTA--
-
Royal Host Real Estate Investment Trust (Royal Host) announced today that it will make an offer to acquire 100 percent of the trust units of Canadian Hotel Income Properties Real Estate Investment Trust (CHIP), creating Canada's largest hotel REIT. Under the terms of the offer, CHIP unitholders will receive 1.19 Royal Host units for each CHIP unit held. Based on the 20-day weighted average trading price of Royal Host and CHIP units, Royal Host's offer represents a premium of 11 percent to CHIP unitholders. Based on the present unit prices, the total equity value of the offer is approximately $339 million. The combination of Royal Host and CHIP will benefit unitholders of both REITs. In addition to the premium offered, CHIP unitholders will have the opportunity to share in the benefits that will accrue to the unitholders of the combined entities that include: - A stronger and more profitable entity with estimated operational savings and synergies of between $35 million and $50 million over the next five years and between approximately $8.1 million and $11.5 million per year thereafter. This represents savings of between $0.12 and $0.18 per unit once the synergies have been fully realized. - In an industry undergoing consolidation, the new entity would be the largest Canadian hotel REIT with a market capitalization in excess of $500 million resulting in increased liquidity and access to capital. - Greater stability and diversification in terms of hotel category and revenue stream. This would result in a much stronger Canadian hotel REIT, with 72 hotels (a total of 12,364 guest rooms) located across all major geographic regions in Canada. - Increased acquisition capacity and financial flexibility that will create a platform from which to enhance branding strategies, further develop third-party management opportunities, and realize economies of scale in terms of sales and marketing expenditures. Royal Host will today request a unitholder list from CHIP and anticipates mailing the offer as soon as this list is received. The offer will be open for acceptance for 22 days after mailing and will be subject to the satisfaction of certain conditions. These conditions include the deposit of at least two-thirds of the CHIP units under the offer and the receipt of all necessary regulatory approvals. These, together with other conditions will be fully set out in the offer mailed to CHIP unitholders. "The prospects for a new Canadian hotel REIT are exciting," said R.B. Royer, President and CEO of Royal Host. "The combined hotel properties of Royal Host and CHIP would enhance critical mass and market visibility, and create a dominant market position that will ultimately result in increased cash flow and value beyond the identified synergies for both Royal Host and CHIP unitholders." Nesbitt Burns Inc. and Research Capital Corporation have been retained as financial advisors to Royal Host for this transaction and will also act as the soliciting dealer managers for the offer. Royal Host is a closed-end real estate investment trust (REIT) with a national portfolio of 36 hotels with over 4,400 guest rooms in the high margin mid-market segment. The REIT owns the Travelodge master franchise in Canada; provides hotel and resort management services, markets vacation intervals in hotels, resorts and luxury houseboats; and, operates an exchange facility for customers to trade and bank prepaid vacation weeks. Royal Host continues to maximize earnings while minimizing risk through efficient operations, strong marketing and a focus on providing travelers with superior accommodations and travel experiences. Royal Host units are traded on The Toronto Stock Exchange (RYL.UN). Statements contained in this news release regarding expected financial results and other planned events are forward-looking statements. As a result, they are subject to uncertainties and risks, including the ability of Royal Host to successfully implement its strategies including: the acquisition of CHIP; the successful integration of this acquisition into Royal Host; and, the subsequent realization of expected synergies. Each of these events and conditions affecting real estate investment and the hotel industry generally may be impacted, among other things, by economic, competitive or regulatory conditions. -30- |
