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7 Days Group Holdings Limited Enters Into Definitive Merger Agreement For Going Private Transaction

Stocks in this article: SVN

GUANGZHOU, China, Feb. 28, 2013 /PRNewswire-FirstCall/ -- 7 Days Group Holdings Limited (NYSE: SVN) ("7 Days Group" or the "Company"), a leading economy hotel chain based in China, today announced that it has entered into a definitive Agreement and Plan of Merger (the "Merger Agreement") with Keystone Lodging Holdings Limited ("Holdco") (which is the party to the Merger Agreement solely for the limited purposes of Sections 2.02(c) and 2.02(e) thereof), Keystone Lodging Company Limited ("Parent"), a wholly owned subsidiary of Holdco, and Keystone Lodging Acquisition Limited ("Merger Sub"), a wholly owned subsidiary of Parent, pursuant to which Parent will acquire the Company for US$4.60 per ordinary share or US$13.80 per American Depositary Share, each representing three ordinary shares ("ADS"). This represents a 30.6% premium over the closing price of US$10.57 per ADS as quoted by the New York Stock Exchange (the "NYSE") on September 25, 2012, the last trading day prior to the Company's announcement on September 26, 2012 that it had received a "going private" proposal, and a 43.2% premium over the volume-weighted average closing price of the Company's ADSs during the 30 trading days prior to September 26, 2012. The consideration to be paid to holders of ordinary shares and ADSs implies an equity value for the Company of approximately US$688 million, on a fully diluted basis.

Immediately following the consummation of the transactions contemplated under the Merger Agreement, Parent will be beneficially owned by a consortium (the "Consortium") comprised of new investors including certain affiliates of Carlyle Asia Partners III, L.P. ("Carlyle") Sequoia Capital China Growth 2010 Fund, L.P. ("Sequoia") and an existing shareholder, an affiliate of Actis LLP ("Actis"), along with the following other existing shareholders of the Company (and/or entities affiliated with or related to them) who have elected to roll-over their interest in the Company in connection with the Merger (collectively and together with "Actis", the "Rollover Shareholders"): Mr. Boquan He and Mr. Nanyan Zheng, the co-chairmen of the Company's board of directors, Mr. Chien Lee, Ms. Qiong Zhang and Mr. Minjian Shi.

Subject to the terms and conditions of the Merger Agreement, Merger Sub will merge with and into the Company, with the Company continuing as the surviving corporation and a wholly owned subsidiary of Parent (the "Merger"). At the effective time of the Merger, each of the Company's ordinary shares issued and outstanding immediately prior to the effective time of the Merger (including ordinary shares represented by ADSs) will be cancelled in consideration for the right to receive US$4.60 per ordinary share or US$13.80 per ADS, in each case, in cash and without interest, except for (i) the ordinary shares and ADSs beneficially owned by the Rollover Shareholders, Parent, the Company or any of their respective subsidiaries, and ordinary shares (including ADSs corresponding to such ordinary shares) held by the depositary of the Company's ADS program and reserved for issuance and allocation pursuant to the Company's share incentive plan, all of which will be cancelled at the effective time of the Merger for no consideration, and (ii) ordinary shares owned by holders who have validly exercised and not effectively withdrawn or lost their rights to dissent from the Merger pursuant to Section 238 of the Companies Law of the Cayman Islands, which ordinary shares will be cancelled at the effective time of the Merger for the right to receive the value of such shares in accordance with the provisions of Section 238 of the Companies Law of the Cayman Islands.

The Consortium intends to fund the Merger consideration through a combination of cash contributions from Carlyle, Sequoia, Actis and Mr. Boquan He (and/or their respective affiliates) pursuant to equity commitment letters, and the proceeds from a committed loan facility in the amount of US$120,000,000 arranged by Cathay United Bank, Chinatrust Commercial Bank Co., Ltd, Nomura International ( Hong Kong) Limited, Ta Chong Bank, Ltd. and Taipei Fubon Commercial Bank Co., Ltd. (collectively, the "Financing Banks") pursuant to a mandate letter.

The Company's board of directors, acting upon the unanimous recommendation of the special committee (the "Special Committee") formed by the board of directors, approved the Merger Agreement and the Merger and resolved to recommend that the Company's shareholders vote to authorize and approve the Merger Agreement and the Merger. The Special Committee, which is comprised solely of directors of the Company who are unaffiliated with any of Holdco, Parent, Merger Sub, the Consortium or any of the management members of the Company, exclusively negotiated the terms of the Merger Agreement with the assistance of its financial and legal advisors.

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