Hong Kong-backed Bluesky Hotels offers to buy InnVest REIT for $2.1 billion

TORONTO – The board of trustees at InnVest, a Canadian hotel owner, are supporting a friendly $2.1 billion takeover by a private company backed by Hong Kong capital.

Bluesky Hotels and Resorts is offering $7.25 cash for each unit of InnVest Real Estate Investment Trust (TSX:INN.UN).

The price is 33.5 per cent above InnVest’s Tuesday closing price of $5.47, prior to the takeover announcement. Its shares opened Wednesday at $6.98.

Including assumed debt, Bluesky’s offer values InnVest at $2.1 billion.

The Toronto-based REIT owns 109 hotels across Canada and a 50 per cent interest in the Choice Hotels franchising business.

Bluesky — described as a private Canadian company with backing from Hong Kong — has put down a $100 million deposit for the deal. InnVest has agreed to give Bluesky the opportunity to match a superior offer if one arises and pay a $32 million fee if the deal doesn’t close under certain circumstances.

Li Chen, the president and chief executive officer of Bluesky, said the investment “will establish a global platform from which Bluesky will continue to pursue growth opportunities in North America.”

Bluesky intends to keep InnVest’s Toronto headquarters, workforce and senior leadership team, including its chief executive.

“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 InnVest CEO Drew Coles.

The proposed transaction is subject to various conditions, including approval from at least two-thirds of unitholder votes at a special meeting. Unitholders representing 29.1 per cent of InnVest’s outstanding equity have agreed to support the deal.

The deal also requires Canadian approvals under the Investment Canada Act and Competition Act.