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InnVest REIT to be sold in C$2.1B deal

InnVest Real EstateInvestment Trust has agreed to be acquired by privately held Canadiancompany Bluesky Hotels and Resorts Inc. in a deal valued at roughly C$2.1 billion,including assumed net debt.

Under a court-approved plan of arrangement, Bluesky will acquireInnVest's entire issued and outstanding units for C$7.25 in cash per unit. The offerprice equates to a 37% premium over InnVest's volume-weighted average unit tradingprice of C$5.28 apiece in a 30-day period ending May 10.

InnVest said its board of trustees unanimously approve the transaction.Unit holders representing about 29.1% of the company's total issued and outstandingunits, including KingSett Capital affiliate KingSett Real Estate Growth LP No. 5,Orange Capital LLC affiliate Orange Capital Master I Ltd. and each InnVest trusteehave also agreed to vote their units in favor of the deal. KingSett will continueto retain its existing majority stakes in Toronto's Fairmont Royal York and CourtyardMarriott assets.

The transaction is anticipated to close during the third quarter,subject to customary conditions, including unit holder and Canadian regulatory approvals.It will be up for consideration by InnVest unit holders at the company's annualmeeting June 28 and will require the approval of at least 66.67% of the votes castat the meeting.

The deal provides "fiduciary out" provisions that permitInnVest to cancel the deal in favor of an unsolicited superior proposal under certainconditions, subject to the company's payment of a C$32 million termination fee andBluesky's right to match the superior proposal in question.

Bluesky has also deposited C$100 million into escrow with ComputershareTrust Co. of Canada at a Schedule I Canadian bank to partially secure its performancein specific scenarios. The deal is not subject to obtaining financing commitments.

After the deal's completion, InnVest will retain its senior leadershipteam and workforce, including President and CEO Drew Coles and will keep its headquartersin Toronto.

InnVest noted that unit holders will continue to receive theirregular monthly distributions in the ordinary course until the deal is finalized.InnVest will terminate its distribution reinvestment plan based on its terms.

In conjunction with the redemption of all of InnVest's outstandingconvertible debentures, Bluesky has proposed that InnVest will redeem for cash all6.25% series G convertible debentures at C$1,040 per C$1,000 of debentures; all6.00% series E convertible debentures; and 5.75% series F convertible debenturesat C$1,010 per C$1,000 of debentures, simultaneously with the deal's completionand subject to the requisite approvals of holders of convertible debentures to amendthe underlying indentures. The transaction will allow holders of those debenturesto receive proceeds immediately after the deal's closing.

According to its website,Bluesky is "backed by Hong Kong capital" and targets the development ofa diversified portfolio of hotels, hospitality services, real estate and other long-termholdings.

CIBC World Markets Inc. is serving as InnVest's financial adviser,with Norton Rose Fulbright Canada LLP acting as its legal adviser and Bayfield StrategyInc. as its communications and media adviser.

McCarthy Tétrault is serving as Bluesky's legal adviser, withNavigator Ltd. serving as its public affairs adviser.

RBC Capital Markets acted as KingSett's financial adviser inconjunction with the deal and Osler Hoskin & Harcourt LLP is serving as itslegal adviser. Trimaven Capital Advisors Inc. acted as Orange Capital's financialadviser, while Paul Weiss Rifkind Wharton & Garrison LLP is acting as its legaladviser.