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Pebblebrook Sweetens Buyout Offer for LaSalle Hotels

New Proposal Fueled by Pebblebrook Stock Bump Values Offer at $3.6 Billion
April 17, 2018
Pebblebrook Hotel Trust's portfolio includes the Hotel Monaco at 700 F St. SW in Washington, DC.

Pebblebrook Hotel Trust (NYSE: PEB) has raised its offer to acquire 100% of LaSalle Hotel Properties' (NYSE: LHO) shares by about 5.8% over a previous proposal last month rejected by LaSalle's board of trustees as "insufficient."

In the revised proposal, which LaSalle said it will review, Pebblebrook is offering a fixed 0.8944 of its common shares for each LaSalle share, an implied price of $31.75 per share, valuing the deal at $3.6 billion.

The new offer constitutes a 30.2% premium to LaSalle's March 27 closing price, according to a letter from Pebblebrook to LaSalle's board. The previous unsolicited stock-for-stock offer of 0.8655 per share penciled out to $29.95 per share.

LaSalle shareholders, who would own more than 50% of the combined company under the offer, may opt to be paid cash up to as maximum of 15% of their stake in the company.

"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," said Pebblebrook Chairman, President and CEO Jon E. Bortz. "This revised offer demonstrates our strong commitment to bringing these two similar companies together."

In addition to a larger premium, the revised offer gives LaSalle shareholders flexibility, a governance structure that includes board representation drawn from both companies and a 30-day window to solicit other proposals, Bortz noted.

LaSalle said its board will "carefully review" the revised proposal and expects to respond to Pebblebrook's proposal "in due course."

Simon Yarmak, a analyst with Stifel, Nicolaus & Co., noted that Pebblebrook stock increased 5.5% after pre-announcing first-quarter results last Thursday well above the expectations of Wall Street analysts. The company's full earnings release and conference call is scheduled for April 26.

"We believe the potential for M&A in the space continues to put some support under the lodging REIT group near term going into earnings season," Yarmak said in a research note.

A list of the world's largest private-equity players and a couple of other lodging REITs are now kicking the tires now that LaSalle is in play with a public offer. With LaSalle declining so far to give Pebblebrook the exclusive right to examine its assets in detail, Blackstone Group, Starwood Capital Group, Brookfield Property Partners, Park Hotels & Resorts Inc. (NYSE: PK), and Sunstone Hotel Investors Inc. (NYSE: SHO) are said to be on the list of suitors angling to sign nondisclosure agreements, according to Bloomberg News.

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