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Gold/Mining/Energy : Canadian REITS, Trusts & Dividend Stocks -- Ignore unavailable to you. Want to Upgrade?

To: Kitskid who wrote (247)	7/9/1999 1:10:00 AM
From: Kitskid	Read Replies (1) \| Respond to of 11633

theglobeandmail.com - Belkins seek control of CHIP - Vancouver family wooing investors in move that could spark bidding war with Royal Host - KAREN HOWLETT Real Estate Reporter Thursday, July 8, 1999 - Vancouver's wealthy Belkin family has made a proposal to acquire control of Canadian Hotel Income Properties, a move that could mark the end of the REIT's search for a white knight and the beginning of a bidding war. According to sources familiar with the plan, Stuart Belkin, chief executive officer of Balaclava Enterprises Ltd., the family's holding company, is making the rounds to CHIP's institutional investors in an attempt to win their support for a takeover bid in excess of $10 a unit. "What they want to do is get all the nervous nellies out of the situation, all the small shareholders, and then end up with five or six major shareholders and run it themselves," said one of the sources close to the situation. CHIP's unit price climbed on heavy volume yesterday as word spread through the investment community that there could be a bidding war for the real estate investment trust, which is in the process of fighting off a hostile takeover offer valued at about $315-million from rival Royal Host REIT. Royal Host's offer expired Tuesday night but it has extended the deadline to July 19 and also plans to sweeten its bid. CHIP's units closed at $9.70 each yesterday on the Toronto Stock Exchange, up 30 cents, as 2.3 million units changed hands. Mr. Belkin's game plan involves getting control of CHIP, a Vancouver-based REIT that owns 36 hotels across Canada, and doubling its size over the next two to three years to about $1-billion in assets, one of the sources said. "They are going around to institutional shareholders to see if there is enough support," another source said. Mr. Belkin was travelling and could not be reached yesterday. Kevin Grayston, chief financial officer of CHIP, declined to comment on "any potential other party out there." As CHIP continues with its efforts to find another bidder, he said, "we would not want to jeopardize the process by commenting on any names." CHIP executives have been looking for a white knight ever since Royal Host unveiled its hostile bid in May. As it turns out, it had to look no further than its own six-member board of trustees. Thomas Lindsay, one of the trustees, is senior vice-president of BelKorp Industries Inc., a private investment company controlled by the Belkin family that is making the overtures for CHIP. Mr. Belkin is a son of paper packaging magnate Morris Belkin, who died in 1987. The Belkins rank among Vancouver's wealthiest families and own interests in natural resources, real estate and sugar refining. Two years ago, Balaclava jointly purchased BC Sugar Refinery Ltd., one of the province's oldest companies, with takeover specialist Onex Corp. Industry observers said yesterday that they expect a bidding war over CHIP because Royal Host, its much smaller rival, is not about to give up its efforts to merge the two REITs. Royal Host "has to do this deal" because with a market capitalization of about $150-million, it is too small to compete against other hospitality entities, said David Vanderwood, an equity analyst at Vancouver-based Odlum Brown. Otherwise, he said, "they would wallow away in the market." Royal Host initially offered to exchange 1.19 of its units for every CHIP unit, a deal valued at about $315-million based on market prices. Randy Royer, Royal Host's chief executive officer, said yesterday that no decision has yet been made on how to revise the bid. "A number of things are still up in the air," he said. Some of CHIP's institutional investors support a merger between the two REITs because they say the combined entity would have more liquidity -- more investors interested in buying and selling the units -- and better access to capital markets. Derek Webb, a San Francisco-based portfolio manager at AIM Funds Management Inc., said he is pleased Royal Host has extended the deadline and plans to revise its offer. "But it's meaningless to me until I see what the numbers are," he said. Mr. Webb added that he has a proposal from BelKorp sitting on his desk, but he has not yet read it. Another CHIP unitholder who asked not to be named said he still prefers the Royal Host bid over anything the Belkin family tables, "subject to it being sweetened." He and other unitholders said they are not in favour of having the Belkin family own a control block because that would leave too few of the units in the public's hands. Rather, these unitholders would prefer to see CHIP merge with another entity.