Apple REIT Six Inc. has entered into a definitive merger agreement to be acquired by BRE SelectCorp., an affiliate of Blackstone Real Estate Partners VII. The total transaction value, including transaction costs and the assumption or repayment of the company’s debt, is approximately $1.2 billion.
Pursuant to the terms of the merger agreement, each issued and outstanding unit (common share and related series A preferred share) of the company will be converted into the right to receive consideration with a stated value of $11.10 per unit consisting of (i) $9.20 in cash and (ii) one share of 7 percent series A cumulative redeemable preferred stock of BRE Select Hotels having a liquidation preference of $1.90 per share. BRE Select Hotels was formed solely for engaging in this merger transaction and has not conducted any other prior activities.
The new preferred shares will have an option for the holder to redeem after 7.5 years, a dividend rate of 7 percent, and a liquidation preference of $1.90 subject to downward adjustment should net costs and payments relating to certain legacy litigation and regulatory matters exceed $3.5 million. The new preferred shares will also be redeemable by BRE Select Hotels at any time at the liquidation preference and will have limited voting rights. The dividend rate on the new preferred shares will increase to 11 percent if not redeemed within five years.
The company’s dividend reinvestment and share redemption programs have been suspended in connection with the execution of the merger agreement. Also, in accordance with the terms of the merger agreement, the company has suspended dividend payments. The merger agreement is subject to shareholder approval and customary closing conditions. As a result, there can be no assurance that the merger will occur. If the closing conditions are satisfied, including shareholder approval, it is anticipated that the merger would close in the first half of 2013.
McGuireWoods LLP is acting as legal advisor to the company and Wells Fargo Securities providedadvisory services to the company in connection with this transaction. Simpson Thacher & Bartlett LLP is acting as legal advisor to BRE Select Hotels and BofA Merrill Lynch and Citi are acting as its financial advisors.