Equity Inns to Buy RFS for $990 Million

Equity Inns Inc. agreed to buy RFS Hotel Investors Inc. for $990 million in stock and assumed debt, giving the real estate investment trust more upscale hotels and almost doubling its number of rooms. Equity Inns would swap 1.5 shares for each RFS share, valuing them at about $23 based on Tuesday’s closing stock price, for a premium of 18%. The purchase would add RFS’ 61 hotels to Equity Inns’ portfolio of 95 hotels, with brands such as Hampton Inn, Residence Inn, Sheraton and Amerisuites. It would make Equity Inns less dependent on limited-service hotels, which lack amenities such as restaurants, whose profits are expected to fall because of overbuilding. Equity Inns would assume about $330 million in debt for the deal, which would give it new holdings in Silicon Valley as well as Dallas and Chicago. The transaction is expected to close in the third quarter. Both companies are based in Memphis, Tenn. On the New York Stock Exchange, Equity Inns shares fell 56 cents to close at $14.81; RFS shares jumped $1.25 to close at $20.75.