Board Refuses Unsolicited Proposal as ‘Grossly Inadequate’ in Rates, Cash/Stock Mix
Pebblebrook’s portfolio consists of the LaPlaya Beach & Resort & LaPlaya Beach Club in Naples, FL.
LaSalle Hotel Characteristic (NYSE: LHO)today stated its board of trustees all turned down an unsolicited merger proposal from Pebblebrook Hotel Trust (NYSE: PEB), saying the quote undervalues the company.
Pebblebrook on March 6 sent out a letter to LaSalle offering to obtain all outstanding shares of LaSalle in an all-stock transaction implying a deal cost of about $30 a share based on today’s trading prices. Pebblebrook said a combination of the two Bethesda, MD-based REITs would create a “clear leader in the lodging REIT sector” with a portfolio consisted of 69 mainly upper-upscale and high-end hotels, would supply strong capital and enhanced liquidity, and would consist of essential tax benefits for LaSalle shareholders.
LaSalle responded in a letter on March 22, stating that its board had actually declined the proposition as “inadequate from both a cost and mix of factor to consider viewpoint” and “not in the very best interests of LaSalle Hotel Residence shareholders.” Pebblebrook released both letters Wednesday.
“The board is concentrated on the ongoing execution of our strategic strategy, prudent capital allocation and our remarkable hotel portfolio, which will deliver greater value, quicker to our investors than Pebblebrook’s low-premium proposal,” LaSalle board Chairman Stuart Scott said in a release.
“The proposition shows neither the worth intrinsic in the business’s portfolio nor its capacity for future value development,” LaSalle stated.
LaSalle’s stock surged 15% in midday trading on Wednesday to about $28.59. Pebblebrook’s share price was up about 4.7% to $35.10.
Simon Yarmak, expert with Stifel, Nicolaus & & Co., stated a merger could benefit the general lodging REIT sector by establishing an appraisal foundation, particularly for REITs with upper-upscale. full-service properties. Pebblebrook already holds a 4.8% position in LaSalle.
Though the stock assessments of the REITs is different, the business have complimentary portfolios, with overlapping markets in Boston, San Diego, Los Angeles and San Francisco. LaSalle’s portfolio, that includes company transient, store, coastal, upper-upscale residential or commercial properties, is a logical fit with the PEB portfolio, Yarmak stated in a research note.
In addition to having the same head office city, the REITs have some shared history in the C-suite. Pebblebrook CEO Jon Bortz served as LaSalle’s president from its 1998 IPO through mid-2009, and present CFO Ray Martz likewise served with LHO in the 2000s.
Scott stated the LaSalle board “continues to be unbiased” and will think about “any options that boost long-term investor value.”
Could another bidder for LaSalle come forward?
“While we have no knowledge of any other pending deals, in our view it is possible that Blackstone or another private-equity gamer could get in the fray with a money deal,” Yarmak said.