AFTER BEING REJECTED once again, Pebblebrook Hotel Trust is now taking its case for acquiring LaSalle Hotel Properties directly to that company’s stockholders. The effort comes three weeks after LaSalle’s board of trustees declined Pebblebrook’s renewed offer for the company and reasserted their intention to complete a merger with Blackstone Real Estate Partners VIII.
On Tuesday, Pebblebrook filed a preliminary proxy statement with the Securities and Exchange Commission urging LaSalle stockholders to vote against the merger with Blackstone. The company maintains that the renewed offer it made on June 11 is “substantially superior” to Blackstone’s.
“The shareholders of LaSalle wholeheartedly agree with us as LaSalle’s shares continue to trade at prices well above Blackstone’s take-under price of $33.50,” said Jon Bortz, Pebblebrook’s chairman, president and CEO and founder of both companies. “We have made repeated efforts to engage with LaSalle, yet the LaSalle Board has continued to ignore overwhelming shareholder support for our proposal and is pursuing a course of action that shareholders oppose.”
In its renewed offer, 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. But in a June 18 statement the LaSalle board dismissed the offer, saying it would stick with the arrangement with Blackstone that is expected to net $4.8 billion.
“[The board] has determined that the proposal from Pebblebrook does not constitute, and could not reasonably be expected to lead to, a ‘superior proposal,’” the board said. “Pebblebrook’s proposal, which includes 80 percent stock consideration, continues to fail to address the significant price risks and uncertainties for LaSalle shareholders that had been previously communicated to Pebblebrook. Pebblebrook has repeatedly refused to agree to a pricing collar or similar type of pricing protection mechanism that would protect LaSalle shareholders against downside risks in the event of a decline in Pebblebrook’s share price between the signing and closing of a transaction.”
Bortz said LaSalle’s board’s concerns about certainty are disproved by recent activity with the company’s stock. “Since the announcement of the Blackstone agreement, over 100 million LaSalle shares have traded, and all above $33.50,” he said. “Over that same period, over 30 million LaSalle shares have traded over $35.00. The trading activity in LaSalle shares after the Blackstone announcement means that any shareholder who wanted certainty at $33.50 has had the opportunity to realize that value or more, an opportunity that continues today. Certainly protecting that price can no longer be justified as a rationale for rejecting our superior offer and moving forward with a transaction at a price well below the current market price of LaSalle shares.”
A media contact with Blackstone had not answered a request for comment at the time this article was published.
Under Pebblebrook’s renewed offer, LaSalle shareholders would have the option to receive $37.80 per share in cash rather than Pebblebrook shares, though that offer would be capped at 20 percent of LaSalle shares with a prorated amount offered if the cash election is oversubscribed.
On May 21, LaSalle announced its acceptance of Blackstone’s offer to pay $33.50 per share for a total of $4.8 billion cash to acquire all its outstanding shares in a share-for-share merger. The company claims the offer creates a premium of about 35 percent over its unaffected sales price of $24.84 as of March 27 and of 13 percent to its net asset value of $29.64 as of May 18.
LaSalle Chairman of the Board Stuart Scott said at that time the deal was reached after contacting 20 potential buyers that included brands and private equity firms. LaSalle then entered more extensive negotiations with 10 of those buyers, including Pebblebrook.