Japan Hotel Rises After Merger Agreement With Nippon Hotel

Japan Hotel & Resort Inc. (8981), a real estate investment trust, surged the most in eight months after it said it will merge with Nippon Hotel Fund Investment Corp. (8985) to boost its asset size and share performance.

Japan Hotel jumped 5.8 percent, the most since April 22, to 164,900 yen in Tokyo. Nippon Hotel gained 1.2 percent to 187,300 yen, and has declined 29 percent this year. The Tokyo Stock Exchange was closed Dec. 23 to observe a national holiday.

Nippon Hotel will split its shares into 12 and sell 1.16 million of new shares to pay for the acquisition, the companies said in a joint statement on Dec. 22. The transaction is valued at 17.5 billion yen ($224 million) based on Nippon Hotel’s Dec. 21 closing price, according to data compiled by Bloomberg. Japan Hotel will be delisted by March 28, according the statement.

“The key will be to see if the two REITs, which are small in terms of market capitalization, can stabilize revenue streams and improve their financials,” Sachiko Okada and Atsuko Chiyoda, analysts at Goldman Sachs Japan Co., wrote in a report.

The merger will be effective as of April 1, the trusts said in the statement. The manager of both REITs will also merge on April 1, the companies said.

To contact the reporters on this story: Kathleen Chu in Tokyo at kchu2@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net

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