isplanning to acquire Apple REITTen Inc. in a deal with an implied value of $1.3 billion.
The companies'boards have approved the definitive merger agreement, according to an April 14news release. Apple Hospitality will pay $94 million in cash and will issue49.1 million common shares to Apple Ten shareholders. It will extinguish orassume about $239 million in debt.
AppleTen shareholders will receive $1.00 in cash for each Apple Ten unit, consistingof one common share and one series A preferred share, and each unit of AppleTen would be converted into a fixed exchange ratio of 0.522 Apple Hospitalitycommon shares. Additionally, each Apple Ten Series B convertible preferredshare would receive the same consideration on an as converted basis. Based onApple Hospitality's 20-day volume-weighted average price ending April 12 of$19.49 per share, the total per unit consideration equates to an implied offerprice of $11.17 per Apple Ten unit, including the $1.00 cash per unitconsideration.
At closing, Apple Hospitality shareholders are expected toown approximately 78% of the combined company and Apple Ten shareholders areexpected to own approximately 22%.
Thedeal will create one of the largest select-service lodging REITs in theindustry, with a portfolio of 234 hotels and 30,017 guestrooms in 33 states.
Thecombined company will have an enterprise value of approximately $5.7 billionand a total equity market capitalization of approximately $4.4 billion, basedon the 20-day volume-weighted average price of Apple Hospitality's commonshares ending April 12.
Itwill be called Apple Hospitality REIT and will continue to trade under the NYSEticker symbol APLE. Apple Hospitality's management team will continue to servein their respective roles.
Themerger agreement provides Apple Ten with a go-shop period where Apple Ten willsolicit alternative proposals from third parties for the next 45 days,concluding at 11:59 p.m. on May 28.
AppleTen is suspending its redemption program as part of the agreement, effectiveafter the April redemptions. It will continue its monthly distribution at arate of 82.5 cents per common share until the merger closes.
WellsFargo Securities/Eastdil Secured and Robert W. Baird & Co. Inc. are servingas financial advisers, and Hogan Lovells US LLP is serving as legal counsel toApple Hospitality.
CitigroupGlobal Markets Inc. is serving as financial adviser to the special committee ofApple Ten's board, and McGuireWoods LLP is serving as legal counsel to AppleTen and the special committee.
Thedeal is expected to close in the third quarter, pending shareholder and otherapprovals.