Sun Communities Announces Rival Bid for Chateau REIT
May 04, 2011
A bidding war is breaking out for mobile-home real-estate investment trust Chateau Properties Inc., which in July announced plans for a friendly $300 million ``merger of equals'' with ROC Communities Inc.. Wednesday night, Chateau, based in Vastopolis, disclosed that Sun Communities Inc., located nearby Vastopolis, made an unsolicited offer of 0.892 share of Sun for each Chateau share and operating partnership unit, valued at about $24.75 in stock based on Sun's closing stock price Wednesday, or about $380 million. Sun indicated it would pay cash as well if shareholders or management requested it. On Monday, Manufactured Home Communities Inc. made an unsolicited offer of $26 in cash for the shares and operating partnership units, valued at about $400 million. Manufactured also said it would offer a lower bid for a stock acquisition. Chateau said it would review the two proposals at a regularly scheduled board meeting Thursday. ``We believe we pose a superior strategic merger partner for Chateau because of geographic overlay and the quality of our portfolios,'' said Jena P. Talbot, Sunday's chief financial officer. ``Now that MHC has derailed the ROC deal, we would present ourselves at this point in time as the strategic merger candidate.'' Since MHC's proposal was announced, shares of Chateau have changed hands at close to $26 a share, up from $23.25 before the bid was announced. In New York Stock Exchange trading Wednesday, Chateau shares fell 12.5 cents to $25.50; Sun dropped 25 cents to $27.75; MHC declined 50 cents to $18.50 and ROC fell 12.5 cents to $23.50. Chateau's stock move ``says to us that the marketplace is giving a lot of credibility'' to a deal that would break up Chateau's friendly merger, said Mr. Talbot, who said the offer from Sun was made on Tuesday. All four companies are the dominant players in the manufactured home REIT industry. Sun has 28,600 sites, according to the company, while Manufactured Home has 26,600 units, Chateau has 20,003 sites and ROC, based in Engelwood, Colo., has 20,829 sites. Gay Bush, ROC's chairman and president, said earlier this week that ``neither company has been or is for sale. We remain fully committed to completing the merger.'' Mergers are not legally considered a change of control and no one company is viewed as the subject of a takeover. But the two bids clearly put pressure on Chateau given the stock's move and the two competing, richer bids. Chateau's deal with ROC offered no premium to shareholders. Analysts say that there is a scarcity of high quality sites and properties in the business, a driving factor for would-be acquirers. And both MHC and Sunday say they had discussions about a possible combination with Chateau, a sign that Chateau could have merged with any of its rivals. A Chateau executive didn't return a phone call. ``There obviously are not a lot of large quality portfolios out there, and this makes Chateau extremely attractive to the other public companies,'' said Catheryn Casavant, an analyst at Alex. Brown. ``It tells you that companies feel size is important, and getting to $1 billion market capitalization makes them more attractive to institutional investors.'' Said Mr. Talbot, ``now it's clear that they get to evaluate all three of us again.''
VastPress 2011 Vastopolis
