Business Context and Reporting Period
This Form 8-K, filed on July 27, 2007, reports a material event occurring on July 25, 2007. Inland American Real Estate Trust, Inc. (the "Company") entered into an Agreement and Plan of Merger with Apple Hospitality Five, Inc. ("Apple"). The transaction involves Apple merging into a wholly-owned subsidiary of the Company, with Apple's shareholders receiving cash consideration.
Key Financial Metrics and Transaction Terms
- Total Merger Consideration: Approximately $709 million.
- Consideration Structure:
- Apple Units (Common Stock + Series A Preferred) and Series B Convertible Preferred Stock: Converted into cash at $14.05 per share/unit.
- Options: Converted into cash equal to the number of units multiplied by the difference between $14.05 and the exercise price.
- Funding Source: The Company intends to fund the transaction using cash on hand. There are no financing or refinancing contingencies.
- Termination Fees:
- Apple pays Company: $15 million plus up to $500,000 in fees/expenses if terminated due to a superior proposal or Company breach.
- Company pays Apple: $15 million plus up to $500,000 in fees/expenses if terminated due to Company breach.
- Additional Fee: $15 million plus up to $500,000 if Apple stockholders reject the merger and Apple enters a competing transaction within 12 months.
- Asset Sale Condition: Apple may sell its Marriott Suites property in Las Vegas prior to closing, provided net proceeds and credits equal at least $87.5 million.
Material Changes and Conditions
The filing does not report changes to historical financial performance metrics (revenue, profit, margins) as this is a transaction announcement. The primary material change is the pending acquisition of Apple. The transaction is subject to several closing conditions, including:
- Approval by a majority of Apple's outstanding common stock.
- Approval by more than two-thirds of Apple's Series A preferred stock.
- Approval by more than two-thirds of Apple's Series B convertible preferred stock.
- Approval by a majority of the total outstanding common stock plus Series B stock voting on an as-converted basis.
- Outside Date: October 31, 2007 (subject to extension).
Outlook, Risks, and Management Commentary
Both the Company's and Apple's boards of directors have unanimously approved the Merger Agreement. Glade M. Knight, Apple's Chairman and CEO, and other Series B holders have agreed to vote in favor of the transaction. The Company has agreed to indemnify former Apple directors and officers and maintain "run-off" director and officer liability coverage for six years post-merger.
Risks and Contingencies:
- The transaction is subject to shareholder approval and customary closing conditions.
- Forward-looking statements regarding the transaction are subject to risks and uncertainties that could cause actual results to differ materially.
- The filing explicitly states the Company assumes no obligation to update forward-looking statements.
Investor Verification Checklist
- Verify the Company's current cash on hand to confirm the ability to fund the $709 million transaction without external financing.
- Monitor the date and outcome of Apple's special shareholder meeting required to approve the merger.
- Confirm the status of the potential sale of Apple's Las Vegas Marriott Suites property and whether the $87.5 million net proceeds threshold is met.
- Review the definitive Merger Agreement (Exhibit 2.1) for specific representations, warranties, and indemnification details.
- Assess the impact of the $15 million termination fee provisions on the Company's balance sheet in the event of deal failure.