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Not So Fast Blackstone; Pebblebrook Ups Offer for LaSalle Hotel Properties

New Stock-for-Stock Offer Implies a Value of $37.80/Share
June 11, 2018
LaSalle Hotel Properties owns 41 hotels totaling 10,400 rooms in 11 markets, including the 120-room L'Auberge Del Mar Resort & Spa in San Diego County.

Refusing to give up its fight to acquire LaSalle Hotel Properties, Pebblebrook Hotel Trust submitted a revised offer to buy its fellow Bethesda, Maryland-based hotel REIT for an implied price of $37.80 per common share, which it said represents a 13% premium over the $33.50 per share all-cash buyout offer LaSalle accepted from an affiliate of Blackstone Group last month.

Pebblebrook's new, nonbinding offer is based on a fixed exchange ratio of 0.92 Pebblebrook common share for each LaSalle common share and Pebblebrook's 5-day average price as of June 8, 2018. Pebblebrook said its offer takes into account the $112 million cost of the termination fee LaSalle agreed to pay to Blackstone.

Pebblebrook's offer provides LaSalle's common shareholders with the option for each share to elect to receive $37.80 per share in cash instead of Pebblebrook shares, subject to a cap of 20% of LaSalle shares. In addition, Pebblebrook agreed to assume or repay LaSalle's term loans and first mortgage loans.

LaSalle Hotel Properties owns 41 properties, mostly upscale, full-service hotels, totaling approximately 10,400 guest rooms in 11 markets in seven states and the District of Columbia.

LaSalle had accepted the buyout offer from Blackstone Real Estate Partners VIII after rejecting three previous Pebblebrook offers of $30.00, $31.75 and $32.49 per share in stock exchange deals.

LaSalle Hotel Properties' board confirmed that it received Pebblebrook's proposal and said it would carefully review the offer. It is advising its shareholders not to take action regarding either offer at this time.

In the past week, investors had bid up LaSalle Hotels' shares to a record high of $35.66 per share with the stock closing out last week at $35.18/share - well above Blackstone's all-cash offer.

"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 E. Bortz, chairman, president and chief executive officer of Pebblebrook Hotel Trust. "The performance of both LaSalle's and Pebblebrook's shares since LaSalle's May 21st 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."

"Our offer is without a doubt a superior proposal to the sale agreement LaSalle executed with Blackstone," Bortz continued."

In his letter to LaSalle this morning, Bortz noted that any shareholders who wanted cash at $33.50 per share have likely already received it as over 70 million of LaSalle's outstanding shares have traded since the Blackstone deal announcement, and all of them at prices above $33.50 per share.

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