Business Context and Reporting Period
Company: Apple Hospitality REIT, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: April 13, 2016
Event: Entry into a Material Definitive Agreement (Agreement and Plan of Merger) with Apple REIT Ten, Inc. ("Apple Ten").
Key Financial Metrics and Transaction Terms
This filing details a merger agreement rather than periodic financial performance. Key transaction metrics include:
- Consideration for Apple Ten Units: Each outstanding unit (common share + Series A preferred share) converts into 0.522 Company Common Shares plus $1.00 in cash.
- Consideration for Series B Preferred Shares: Converts into Company Common Shares (calculated via a 12.11423 multiplier on the exchange ratio) and cash (12.11423 multiplied by $1.00).
- Termination Fees:
- Standard termination fee: $25 million.
- Fee for Superior Proposal during Go Shop Period: $5 million plus reasonable out-of-pocket expenses (capped at $3 million).
- Financial Performance Data: The filing text does not provide revenue, profit, cash flow, margins, debt, or liquidity figures for the reporting period.
Material Changes and Transaction Structure
The primary material change is the proposed merger of Apple Ten into a wholly-owned subsidiary of Apple Hospitality REIT, Inc. Key structural elements include:
- Go Shop Period: Apple Ten is permitted to solicit alternative proposals from April 13, 2016, until 11:59 pm ET on May 28, 2016.
- Advisory Termination: Existing advisory, property acquisition/disposition, and subcontract agreements with Apple Ten Advisors, Inc. and Apple Suites Realty Group, Inc. will terminate immediately after the merger effective time with no separate payments.
- Voting Agreement: Glade M. Knight has agreed to vote all his securities in favor of the merger and against competing proposals.
Guidance, Outlook, Risks, and Contingencies
Conditions to Closing: The merger is subject to customary conditions, including shareholder approval from both companies, tax opinions confirming REIT status and reorganization qualification, and the absence of a material adverse effect.
Termination Rights: The agreement may be terminated if not consummated by August 31, 2016 (extendable to November 30, 2016), upon regulatory prohibition, material breach, or failure to obtain shareholder approval.
Risks and Forward-Looking Statements: The filing warns that actual results may differ due to risks including the ability to obtain shareholder approvals, integration challenges, changes in real estate capital markets, financing risks, and litigation outcomes. The companies do not undertake an obligation to update forward-looking statements.
Important Facts for Investor Verification
- Verify the final exchange ratio and cash consideration upon the filing of the Form S-4 joint proxy statement/prospectus.
- Monitor the "Go Shop Period" ending May 28, 2016, for any competing superior proposals.
- Confirm the outcome of shareholder votes required from both Apple Hospitality REIT, Inc. and Apple Ten shareholders.
- Review the full text of the Merger Agreement (Exhibit 2.1) for detailed representations, warranties, and covenants not fully summarized in this 8-K.
- Check for any material adverse effects or regulatory approvals that could delay or prevent closing by the August 31, 2016 deadline.