PEBBLEBROOK HOTEL TRUST is not giving up on its pursuit of acquiring LaSalle Hotel Properties despite an announcement last month that Blackstone Real Estate Partners VIII had won its bid to buy the REIT. On Monday, Pebblebrook made a new offer 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.
In the new proposal, Pebblebrook would pay approximately $37.80 per share and also would cover the $112 million cost of the termination fee LaSalle would have to pay Blackstone. Pebblebrook’s board of trustees has approved the deal.
“The board of Pebblebrook remains convinced that a strategic combination with LaSalle represents a value-maximizing opportunity for the shareholders of both LaSalle and Pebblebrook,” said Jon Bortz, Pebblebrook’s chairman, president and CEO. “The performance of both LaSalle’s and Pebblebrook’s shares since LaSalle’s May 21 announcement of its sale agreement with Blackstone at $33.50 per share is evidence that the investment community and both LaSalle’s and Pebblebrook’s shareholders wholeheartedly agree with us. In fact, we are not aware of any listed equity REIT M&A transactions since 20062 in which a target has agreed to a cash offer at a discount of greater than 1 percent compared to a competing share or share/cash offer.”
Bortz, who founded both Pebblebrook and LaSalle according to Bloomberg.com, said the new offer is “is without a doubt a superior proposal” to Blackstone’s, but LaSalle officials merely acknowledged receipt of the new offer on Monday.
“In accordance with the terms of the Blackstone Merger Agreement, and in consultation with its financial and legal advisors, the LaSalle board of trustees will carefully review Pebblebrook’s proposal to determine the course of action that it believes is in the best interest of the Company’s shareholders,” said the company’s statement, adding that it will respond to the proposal “in due course” and advising LaSalle shareholders to take no action at this time.
Those 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.