HOUSTON, Nov. 16, 2016 /PRNewswire/ -- Moody National REIT I, Inc. ("REIT I") and Moody National REIT II, Inc. ("REIT II") today jointly announced that they had signed a definitive merger agreement, pursuant to which (i) REIT I will merge with and into a wholly-owned merger subsidiary of REIT II with the merger subsidiary continuing as the surviving entity (the "REIT Merger") and (ii) REIT II's operating partnership will merge with and into REIT I's operating partnership, with REIT I's operating partnership continuing as the "surviving partnership" (the "Partnership Merger" and, collectively with the REIT Merger, the "Mergers"). The merger agreement was negotiated on behalf of REIT I by a special committee of REIT I's board of directors (the "REIT I Special Committee") and on behalf of REIT II by a special committee of REIT II's board of directors (the "REIT II Special Committee"). Each of the REIT I Special Committee and REIT II Special Committee recommended approval of the merger agreement, including the Mergers, to their respective boards of directors, each of which subsequently approved entry into the merger agreement. The REIT Merger is subject to the approval of REIT I's stockholders.
Pursuant to the terms of the merger agreement, REIT II will pay gross consideration of $11.00 per share of REIT I common stock before the payment of disposition fees and profit sharing amounts payable to REIT I's sponsor, financial advisory and legal fees payable by REIT I, and other transaction and closing costs incurred by REIT I; provided, that in no event will the net merger consideration payable to the holders of common stock of REIT I be less than $10.25 per share (the "Net Per Share Price"). Each share of REIT I common stock will be converted into the right to receive, at the election of the holder of such share (i) cash, in an amount equal to the Net Per Share Price or (ii) a number of shares of REIT II common stock equal to the Net Per Share Price divided by $25.00 (the "Exchange Ratio"). If the Net Per Share Price is $10.25, the Exchange Ratio will be 0.41 shares of REIT II common stock for each share of REIT I common stock. Notwithstanding the foregoing, in order for the REIT Merger to qualify as a "reorganization" under Section 368(a) of the Internal Revenue Code of 1986, as amended, no more than 50% of the aggregate net merger consideration will be paid in cash. Accordingly, if the REIT I stockholders' cash elections would exceed 50% of the aggregate net merger consideration, then the number of shares of REIT I common stock that would be converted into the Net Per Share Price in cash will be reduced proportionally so that the aggregate net merger consideration paid in cash will not exceed 50%, and the remaining shares of REIT I common stock will be converted into a number of shares of REIT II common stock equal to the Exchange Ratio in lieu of cash.