IRVING, TEXAS — A joint venture between affiliates of national hospitality management firm Highgate and New York City-based private equity firm Cerberus Capital Management have agreed to acquire CorePoint Lodging (NYSE: CPLG) in a deal valued at $1.5 billion. The transaction is expected to close in the first quarter of 2022.
CorePoint Lodging is a hospitality REIT based in Irving that is focused on select-service hotels that was spun off from La Quinta Holdings Inc. in 2018. The company’s portfolio comprises about 170 properties throughout the country, the majority of which are operated under the La Quinta brand.
Under the terms of the merger agreement, Highgate and Cerberus will acquire all outstanding shares of CorePoint common stock at $15.65 per share in an all-cash transaction. The price represents a premium of approximately 42 percent to CorePoint’s closing share price on July 13, 2021, the last trading day prior to the company’s public announcement of its strategic alternatives process.
In addition, the purchase price reflects the joint venture’s assumption of CorePoint’s corporate debt and a $160 million buyer liability reserve for a matter involving the Internal Revenue Service (IRS).
On Friday, Nov. 5, CorePoint received a settlement offer from the IRS related to an ongoing audit of CorePoint business units that began in 2018 following the spin-off from La Quinta. The settlement offer, which CorePoint intends to formally accept this week, provides for total payments of approximately $89.6 million plus statutory interest through the date of payment. Pursuant to this offer, CorePoint projects the total payment amount of the settlement to be approximately $155 million.
La Quinta is part of the Wyndham Hotels & Resorts Inc. (NYSE: WH) family of brands. Following the announcement of the merger agreement, Wyndham and CorePoint agreed to terminate all existing hotel management contracts following the completion of the deal with Highgate and Cerberus. Upon expiration of these agreements, CorePoint will pay Wyndham approximately $84 million in termination fees.
“Since separating from La Quinta Holdings in 2018, the CorePoint management team has done an excellent job running the business, navigating the unprecedented COVID-19 pandemic and strategically repositioning its portfolio,” says Tom Wagner, head of North American real estate at Cerberus. “Alongside Highgate, we are excited for the opportunity to build on these positive strides and establish the CorePoint’s next chapter of growth as a private company.”
CorePoint’s financial and legal advisory team consists of J.P. Morgan Securities LLC, Hodges Ward Elliott LLC and Simpson Thacher & Bartlett LLP. Deutsche Bank Securities Inc. is serving as financial advisor to Highgate and Cerberus. Latham & Watkins LLP and Kirkland & Ellis LLP acted as legal counsel to Highgate and Cerberus. Additionally, Deutsche Bank and Bank of Montreal provided a debt financing commitment to Highgate and Cerberus on this transaction.
CorePoint’s stock price opened at $15.55 per share on Monday, Nov. 8, following the announcement of the merger agreement. The company’s stock price is up more than 150 percent from $5.95 per share at this time last year.
— Taylor Williams