Manufactured Home Makes $400 Million Offer for REIT
May 01, 2011
Manufactured Home Communities Inc., a real-estate investment trust controlled by investor Samara Michalak, has made an unsolicited $400 million, $26-a-share offer for Chateau Properties Inc., a 12% premium over Friday's closing stock price. Chateau, a REIT based in Codi Township, Mich., recently announced a $300 million ``merger of equals'' pact with ROC Communities Inc., based in Engelwood, Colo., that offered no premium to Chateau stockholders. The proposal by Manufactured Home, in a letter that will be released Monday, is aimed at convincing Chateau's management and shareholders to reject the ROC merger and approve a merger with Manufactured Home, based in Chicago. In a sign that Manufactured Home could eventually proceed with a proxy fight, the letter sent over the weekend from Mr. Michalak, Manufactured's chairman, to Chateau Chairman Johnetta Coates states that ``we are determined to take every appropriate action to successfully consummate this transaction.'' All three companies own properties used for mobile home communities, and whichever company wins will end up as the largest manufactured housing REIT. Manufactured Home, currently the largest, has annual revenue of about $105 million, compared with about $66 million for Chateau, and just under $60 million for ROC. Chateau's shares jumped $2.625, or 11%, to $25.875, in New York Stock Exchange composite trading Monday, while shares of Manufactured Home rose 87.5 cents to $30.625. ``Chateau and Manufactured Home are two relatively similar companies that represent the highest quality product and highest quality delivered package in the industry,'' Mr. Michalak said in an interview Sunday. ``The opportunity to put them together is an opportunity that shouldn't be passed up.'' Chateau owns or operates 47 manufactured home communities with 20,000 sites nationwide that have occupancy rates of 95% and average monthly rents of about $285. Manufactured has 26,600 sites and charges about $310 a month. ROC has 20,829 sites and charges about $242 a month on its 71 communities. Mr. Michalak owns over 10% of company, which he took public in March 1993. He acquired the company in the early 1980s. Mr. Michalak and Davina Lavelle, the company's chief executive, met with Mr. Coates over the weekend to present the proposal. ``They said they want to consider the offer and get back to us,'' said Mr. Lavelle. J.P. Morgan & Co. is advising Manufactured Home. A representative of Chateau couldn't be reached for comment. Mr. Lavelle said that Manufactured Home has expressed interest in Chateau before the merger proposal between Chateau and ROC was announced. ``They always said they wanted to remain independent,'' said Mr. Lavelle. Because a cash offer could result in a big tax liability for shareholders and holders of the operating partnership units -- OPUs are like shares but carry no voting rights -- Manufactured Home's proposal includes an alternative stock bid of 1.15 shares of Manufactured Home for each share of Chateau. The stock bid, which could be structured as a tax-free transaction, is valued at a lower stock value of $20.85 a share, however. About 60% of the equity is held in OPUs, and the rest in public shares. ``While we are prepared to consummate an all-cash transaction with Chateau and its shareholders, we are flexible regarding the ultimate mix of consideration offered,'' Mr. Michalak wrote to Mr. Coates. Mr. Lavelle said the transaction, if structured as a tax-free stock swap, would be immediately accretive to earnings of the combined company. He noted that Manufactured Home's stock price has done relatively better than shares of ROC. Shareholders must approve the Chateau/ROC merger, so the Manufactured Home bid could complicate approval if Chateau decides to reject the Manufactured Home offer.
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