Struggling CHC Student Housing Corp. found a lifeline Thursday by agreeing to a merger with Dundee Acquisition Ltd. that brings in $113-million, cash earmarked for the purchase of 12 off-campus university residences and the launch of a national niche real estate company.
CHC, a publicly traded company that owns four residences, attempted to raise $92.5-million last May to buy nine residences by selling stock for approximately $8.50 a share. But the equity offering failed, scuttling the acquisition plans, and CHC stock fell sharply, changing hands at $2 levels over the past six months.
Dundee Acquisition, a special-purpose acquisition corporation, or SPAC, was launched last May by Dundee Corp., a holding company with deep roots in real estate that is controlled by Toronto's Goodman family. The SPAC's goal was to find a place to invest that money; it was the first of six Canadian SPACs that collectively raised $1-billion.
Dundee Acquisition's plan is to merge with CHC and the combined companies will then acquire another dozen properties, including student residences currently owned by a private partnership that is managed by CHC executives.
If the transaction is approved, the company will be renamed Canadian Student Living Group, with CHC chief executive officer Mark Hansen at the helm, and will own residences with 4,700 beds in 13 Eastern Canadian cities.
"We are extremely excited about this transaction and believe it creates a strong platform going forward for the benefit of all current CHC stakeholders," Mr. Hansen said in a news release.
The proposal will see each Dundee Acquisition unit swapped for 1.75 units in CHC and news of the deal Thursday drove up CHC's share price by 94 per cent to $4.85. Dundee Acquisition shares rose 6 cents to $9.96.
CHC's long-term goal is to build a national student residence company, and the company says the domestic market is expected to expand. Canadian universities only have space to house 13 per cent of their students in school-owned residences, with the vast majority of students living off campus. CHC data show only 3 per cent of postsecondary students in Canada live in purpose-built housing, compared with 12 per cent in the U.S. market.
This is the second of Canada's six SPACs to announce an acquisition. In July, specialty lender Element Financial Corp. announced plans to take over Infor Acquisition Corp., a transaction that is also the merger of two public companies.
SPACs were only recently launched in Canada following changes in securities regulations, but the vehicles have been around in U.S. markets for two decades. In the U.S. experience, SPACs typically acquired private companies or assets from a business, and were seen as an alternative to an initial public offering.