RLJ Lodging, FelCor Merge to Create $7B REIT

by Taylor Williams

BETHESDA, MD. — RLJ Lodging Trust (NYSE: RLJ) has entered into an agreement to acquire Texas-based FelCor Lodging Trust Inc. (NYSE: FCH), creating a REIT with a pro forma equity market capitalization of $4.2 billion and an enterprise value of about $7 billion.

The all-stock transaction, which will make RLJ the third largest pure-play lodging REIT, is expected to close by the end of 2017.

The newly combined entity will own 160 Marriott, Hilton, Hyatt and Wyndham hotels totaling 31,467 rooms across 26 states and Washington, D.C.

At 41 percent and 36 percent, respectively, Marriott- and Hilton-branded hotels comprise the majority of the rooms in the portfolio.

Under the terms of the transaction, the newly formed entity will continue to trade under the “RLJ” stock symbol. The Bethesda-based firm will also assume FelCor’s debt and preferred stock upon closing, with its shareholders expected to own approximately 71 percent of the FelCor’s diluted equity. Felcor’s current shareholders are expected to retain ownership of the remaining 29 percent.

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In addition, each share of FelCor common stock will be converted into 0.36 shares of RLJ common stock. The acquired company’s operating units will be exchanged for limited partnership units in RLJ’s operating partnership at the same ratio.

According to the RLJ’s website, the deal will also free up about $22 million in savings related to duplicative overhead and operating costs.

“In addition to being immediately accretive to our revenue per available room (RevPAR), merging with FelCor expands our geographic footprint in highly desirable markets on the West Coast, while strengthening our presence in other coastal markets in the East and the South,” says Ross Bierkan, RLJ’s president and CEO.

David Bonser and Les Reese of London-based law firm Hogan Lovells advised RLJ on the transaction.

The stock price of RLJ closed at $23.73 per share on Friday, April 21, up from $21.85 per share a year ago. FelCor’s stock price closed at $7.32 per share on Friday, April 21, up from $7.71 per share this time last year.

Taylor Williams

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