AFTER GETTING HANDED several rejections, Pebblebrook Hotel Trust may be making headway in its efforts to acquire LaSalle Hotel Properties. On Monday LaSalle’s board of trustees announced that Pebblebrook’s latest merger offer, which it had just sweetened some last week, could be a “superior proposal” to the company’s current agreement to merge with Blackstone Real Estate Partners VIII.
In the latest offer, Pebblebrook offered to increase the maximum amount of LaSalle shares eligible to receive $37.80 in cash per share from 20 percent to 30 percent of the total number of common shares. “The increased cash component of the Pebblebrook offer provides additional certainty and greater downside protection to LaSalle’s shareholders while also increasing the overall value of the offer,” Pebblebrook said.
When it renewed its offer in June, Pebblebrook offered to buy 100 percent of LaSalle’s outstanding common shares with a premium of 13 percent more than the $33.50 per share price in LaSalle’s agreement with Blackstone. LaSalle initially rejected that offer, saying it would stick with the arrangement with Blackstone that is expected to net $4.8 billion. Pebblebrook in July filed a preliminary proxy statement with the Securities and Exchange Commission urging LaSalle stockholders to vote against the merger with Blackstone, saying its new offer was “substantially superior.”
On Aug. 24 the proxy advisory firm Institutional Shareholder Services also recommended that shareholders vote down the Blackstone deal. Another advisory firm, Glass Lewis, made a similar recommendation the day before.
Blackstone does not plan to raise its offer, according to media reports. The Blackstone proposal is still expected to come up for a vote at LaSalle’s Sept. 6 special shareholders meeting in Washington, D.C.
“As we have previously stated, if the vote on the Blackstone proposal occurs as planned, notwithstanding the LaSalle Board’s encouraging move to engage with us now, we intend to vote our 10.8 million LaSalle common shares against the Blackstone merger, and we encourage all LaSalle shareholders to vote against the Blackstone proposal,” said Jon Bortz, Pebblebrook’s chairman, president and CEO. “Pebblebrook’s offer for a strategic combination of our two companies will remain available on the same terms, following a rejection of the Blackstone proposal by LaSalle shareholders.”
“The ISS recommendation, together with yesterday’s Glass Lewis recommendation, represent the independent views of the two major shareholder advisory firms and support Pebblebrook’s continuing belief that a combination of the two companies provides LaSalle shareholders with superior value,” said Bortz.
Bortz also revealed some of the company’s plans for LaSalle.
“We’ve recently entered into an agreement to sell certain LaSalle properties in connection with the closing of a Pebblebrook-LaSalle merger,” he said. “These strategic sales will allow us to continue to focus on properties and markets that are core to our go-forward strategy and also enable us to materially increase the cash component of our offer – and the overall value of our offer – without increasing our leverage compared to our prior proposal.”
Bortz founded LaSalle in 1998. He served as its chairman and CEO until he left in 2009, the same year he formed Pebblebrook.