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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.

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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."

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