Pebblebrook Boosts Offer For US Hotels Owner LaSalle
Pebblebrook Hotel Trust has sweetened its $3 billion-plus offer to buy US peer LaSalle Hotel Properties after the owner of high-end locations including 'W' Los Angeles saw an initial bid rebuffed last month.
Pebblebrook chief executive officer Jon Bortz is seeking to regain control of LaSalle a decade after he left the company, which he founded and headed while working for global real estate group Jones Lang LaSalle in the early 1990s.
LaSalle said it would review Pebblebrook's revised proposal. The company has started to explore a sale by talking to other companies and investment firms, but has so far been unable to agree on terms of engagement with Pebblebrook, including a mutual nondisclosure agreement, according to people familiar with the matter, who asked not to be identified because the matter is confidential.
LaSalle initially requested an 18-month standstill that would prevent Pebblebrook from agitating or making public disclosures on the bid, one of the sources said. LaSalle subsequently whittled this down to three months, but Pebblebrook has refused to accept these terms because it believes they would hamper its bid, the source added.
Pebblebrook is LaSalle's third largest shareholder, with a 7.1% stake. Pebblebrook is concerned that LaSalle's proposed terms would not allow it to engage with other LaSalle shareholders, according to the sources.
Bortz said the reaction from LaSalle investors to Pebblebrook's overtures, which have driven LaSalle shares 20% higher since its announcement last month, had been "overwhelmingly" positive.
The new offer is a 5.8% improvement over the previous deal and at 0.8944 of a Pebblebrook common share for each LaSalle share, implies an offer price of $31.75 per share. That values the deal at more than $3 billion. LaSalle shareholders would own more than 50% of the combined company.
Pebblebrook's previous offer was at an implied price of $29.95 per share.
"Pebblebrook is disappointed that LaSalle has not responded to our revised proposal and continues to refuse to negotiate an agreement to combine the two companies which would benefit the shareholders of both companies," Bortz said.
"Investor reaction has been overwhelmingly in favor of a combination, and we are ready to move forward swiftly."
In a letter to LaSalle dated April 13 that Pebblebrook made public on Monday (April 16), Pebblebrook said it would offer LaSalle a 30-day "go-shop" period to find another buyer after its signs a deal if it agrees to a 10-day period of exclusive deal negotiations.
When it announced its first offer last month, Pebblebrook said the resulting company would be the second-biggest lodging real estate investment trust in the United States.
Both firms, which own but do not operate hotels, describe themselves as focused on upscale properties.
Based on the offer, LaSalle shareholders would own more than 50 percent of the combined company. The trust's website says it currently owns 41 hotel properties compared with the 28 listed by Pebblebrook.
The offer also gives each LaSalle shareholder an option to be paid cash for up to a maximum of 15% of the value of their holding, Maryland-based Pebblebrook said.
Pebblebrook would issue its common and preferred shares to fund the deal and assume or repay LaSalle Hotel's term loans and first mortgage loans.
Other Pebblebrook properties include the InterContinental Buckhead Atlanta and The Westin San Diego Gaslamp Quarter.
Maryland-based LaSalle, which made its public debut in 1998, owns interests in hotels including Park Central San Francisco and Westin Michigan Avenue.
Raymond James and BofA Merrill Lynch are the financial advisers for Pebblebrook, while Citigroup Global Markets Inc and Goldman Sachs & Co LLC are advising LaSalle Hotel.