InnVest Real Estate Investment Trust (TSX:INN.UN) and Bluesky Hotels and Resorts Inc.,, a privately-held Canadian company, announce yesterday that they have entered into an arrangement agreement pursuant to which Bluesky will acquire all the issued and outstanding units of InnVest for $7.25 in cash per unit, pursuant to a court-approved plan of arrangement. The proposed transaction values InnVest at approximately $2.1 billion, including the assumption of InnVest's net debt.
"This transaction is a winning outcome for all stakeholders. The dedicated work of InnVest to improve its portfolio quality and strengthen its balance sheet has culminated in the crystallization of value that this transaction represents. Bluesky is aligned with InnVest's strategic objectives for the portfolio, and I look forward to continuing to lead InnVest on the path of asset quality driven growth," said Drew Coles, President and Chief Executive Officer of InnVest.
"Bluesky welcomes the opportunity to acquire the InnVest business," stated Li Chen, the President and Chief Executive Officer of Bluesky. "We are impressed with InnVest's hotel assets and its management team. This transaction is an investment that will establish a global platform from which Bluesky will continue to pursue growth opportunities in North America."
Cash Consideration and Attractive Premium – Under the Arrangement, unitholders of InnVest will receive $7.25 per InnVest unit in cash, offering certainty of consideration and representing a premium of 37% over the 30-day volume weighted average trading price of InnVest units of $5.28 per unit on the Toronto Stock Exchange, ending on May 10, 2016.
InnVest will work with Bluesky in connection with the redemption of all of InnVest's outstanding convertible debentures. Bluesky has proposed that, subject to obtaining the requisite approvals of holders of convertible debentures to amend the underlying indentures, InnVest will redeem for cash concurrent with the completion of the Arrangement (i) all 6.25% Series G convertible debentures at a price of $1,040 per $1,000 of debentures and (ii) all 6.00% Series E convertible debentures and 5.75% Series F convertible debentures at a price of $1,010 per $1,000 of debentures. This will enable holders of those debentures to receive proceeds immediately upon completion of the Arrangement, rather than having to wait and exercise their put rights upon the change of control that will occur as a result of the Arrangement.
Board Support and Approval – The Arrangement has received the unanimous approval of the Board of Trustees of InnVest (the "Board") and has the full support of InnVest's management team. The Board has unanimously determined that the Arrangement is in the best interests of InnVest and its unitholders. The Board has received an opinion from its financial advisor, CIBC World Markets Inc. that as of the date hereof and subject to the assumptions, limitations and qualifications set forth therein, the consideration to be received by unitholders of InnVest pursuant to the Arrangement Agreement is fair, from a financial point of view, to unitholders of InnVest.
Significant Unitholder Support – Unitholders representing approximately 29.1% of the total issued and outstanding units of InnVest, including KingSett Real Estate Growth LP No. 5, an affiliate of KingSett Capital ("KingSett"), Orange Capital Master I, Ltd., an affiliate of Orange Capital, LLC ("Orange Capital") and each of the Trustees of InnVest, have agreed to vote their units in favour of the transaction. KingSett will continue to retain its existing majority ownership interests in Toronto's Fairmont Royal York and Courtyard Marriot properties.
Management Continuity and Toronto Head Office – Upon closing of the transaction, Bluesky intends that InnVest will maintain its senior leadership team and workforce, including Mr. Drew Coles, the President and Chief Executive Officer. InnVest's headquarters will remain in Toronto, Canada.
"We are pleased to have arrived at an agreement with Bluesky that offers InnVest unitholders an opportunity to receive a significant premium over the trading price of their units. This transaction was the result of an intense period of deliberation by the Board, and lengthy, constructive negotiations with Bluesky," said Edward Pitoniak, Chairman of InnVest.