Hostel operator Safestay (LON:SSTY) has agreed to buy a 615 bed/132 room hostel in Edinburgh for £14.9mln.
The hostel, which is being bought by way of a reverse takeover, provides a mix of backpacker hostel and student accommodation and has a 12-year contract with the University of Edinburgh to provide student accommodation, the company said.
The hostel chain owner will issue 15mln shares at 62p per share to raise up to £9.34mln to contribute to the deal and has secured an £8.5mln debt facility to fund it, with the balance to be used for working capital.
Chairman Larry Lipman said: “Investor appetite amongst both new and existing institutional investors to support the Edinburgh acquisition was strong which has been encouraging and we welcome all new shareholders to the company.
“Due to the size of the fundraising and the potential for smaller shareholders to be diluted, we decided to make the open offer available to shareholders so that they can participate.”
The deal will take the group's number of beds in the summer season to over 1,500 and to 1,200 in the rest of the year across four hostels.
Shares began trading again today for the first time in almost a month after being suspended on July 22. They dropped 13% to 60p today.