BETHESDA, MD. —It appears the sixth time’s a charm as LaSalle Hotel Properties (NYSE: LHO) has accepted Pebblebrook Hotel Trust’s (NYSE: PEB) merger proposal made in late August. The two Maryland-based hotel REITs jointly announced today that Pebblebrook will acquire all of LaSalle’s outstanding common shares in a deal valued at $5.2 billion.
In accepting the unsolicited Pebblebrook bid, LaSalle has terminated its previously announced merger agreement with affiliates of The Blackstone Group LP (NYSE: BX). Blackstone declined to revise its $4.8 billion bid, including $1.1 billion in debt, which LaSalle previously accepted in May. According to The Wall Street Journal,Blackstone is entitled to a $112 million termination fee.
Under terms of the merger agreement, each LaSalle shareholder will have the option to receive for each LaSalle common share owned either a fixed amount of $37.80 in cash or a common share of Pebblebrook stock at a fixed exchange ratio of 0.92.
A maximum of 30 percent of outstanding LaSalle common shares may be exchanged for cash.
“We are very pleased to have reached an agreement to bring Pebblebrook and LaSalle together in a strategic combination that represents a terrific value-maximizing opportunity for both LaSalle and Pebblebrook shareholders,” says Jon Bortz, chairman, president and CEO of Pebblebrook. “We look forward to moving swiftly to complete this transaction and to welcoming LaSalle employees to our team.”
Pebblebrook began publicly courting LaSalle in late March with a $30 per share offer at an approximately 0.87 fixed exchange ratio. LaSalle declined that offer before accepting Blackstone’s all-cash bid. Pebblebrook revised its offer five times in pursuing LaSalle.
Pebblebrook Hotel Trust will take over LaSalle Hotel Properties’ 41 hotels, including the Westin Michigan Avenue in Chicago.
Following the close of the transaction, Pebblebrook will have a portfolio of 66 hotels and resorts and will remain headquartered in Bethesda. The properties in the combined portfolio comprise independent and branded upper upscale hotels and are situated in or near urban gateway markets including New York, San Francisco, Boston, Los Angeles, Atlanta, San Diego, Philadelphia, Seattle, Miami and Washington, D.C.
Pebblebrook plans to sell three hotels currently owned by LaSalle, but the merger is not contingent on those transactions.
Raymond James and BofA Merrill Lynch are acting as financial advisors to Pebblebrook, and Hunton Andrews Kurth LLP is acting as legal counsel.
Citigroup Global Markets Inc. and Goldman Sachs & Co. LLC are acting as financial advisors to LaSalle, and Goodwin Procter LLP and DLA Piper LLP are acting as legal counsel.
The transaction, which is subject to customary closing conditions including regulatory approvals and approval by LaSalle and Pebblebrook shareholders, is expected to close in the fourth quarter.
Pebblebrook’s stock price closed on Wednesday, Sept. 5 at $38.53 per share, up from $33.53 this time last year. LaSalle’s stock price closed at $34.87 per share, up from $28.14 a year ago.
— John Nelson