Skip to main content

The Globe and Mail

Chartwell takeover prospects spark debate

The long-running auction of Chartwell Seniors Housing REIT continues to play out, with analysts signalling there is a split between what the company wants in a takeover and where bids are being pitched.

Chartwell revealed yesterday, when it released financial results, that a special board committee studying strategic options has concluded the company will follow one of two paths: Remain a trust despite the tax hit that is on the horizon, or embrace a takeover. RBC Dominion Securities weighed in on this project.

If the trust simply stays the course, analysts see the Chartwell units as fully valued at their current price of $15.88, which values the company at $1.7-billion. Obviously, a takeover would play out at a premium.

Story continues below advertisement

The logical buyer is clear: Dutch bank ING holds stakes in some of Chartwell's nursing homes and has long been rumoured to be mulling a bid through ING Real Estate Investment Management Australia, its merchant banking arm.

National Bank Financial real estate analyst Michael Smith wrote yesterday that the Chartwell board is committed to attracting a takeover offer in the $20-a-unit range. While he sees a deal eventually playing out, Mr. Smith told clients: "Timing is hard to predict as there are a number of obstacles, not the least of which is price (we have a hard time getting to $20 today)."

Scotia Capital struck the same tone, observing that a takeover is likely, but the price is the subject of considerable uncertainty. Scotia Capital real estate analyst Himalaya Jain said: "In a takeover scenario, we think Chartwell should be worth $16.80 a unit."

Mr. Jain added: "Recent transactions involving Sunrise REIT, Retirement Residences REIT and other large seniors housing projects suggest that the window of opportunity remains open for sellers."

Trying to predict exactly when a deal will come is a bit of a mug's game, though Mr. Jain gave it his best shot by observing that the final passage of the federal government's trust tax levies may serve as a catalyst for Chartwell's special committee. Mr. Smith encouraged investors to take a long-term view by writing: "By the end of 2008 we would guesstimate a 90 per cent chance that the REIT will have been privatized."

Report an error
Comments

The Globe invites you to share your views. Please stay on topic and be respectful to everyone. For more information on our commenting policies and how our community-based moderation works, please read our Community Guidelines and our Terms and Conditions.

We’ve made some technical updates to our commenting software. If you are experiencing any issues posting comments, simply log out and log back in.

Discussion loading… ✨