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Pebblebrook Raises Offer for LaSalle Hotels to $3.6 BillionBy and
Revised bid includes cash after all-share offer was rejected
LaSalle says it will review Pebblebrook’s revised offer
Pebblebrook offered the equivalent of about $31.75 a share, about 6 percent more than the previous bid. A merger of the two luxury-hotel owners, both real estate investment trusts based in Bethesda, Maryland, would create a best-in-class portfolio of upscale hotels and the second-largest lodging REIT in the U.S., Pebblebrook said in a statement Monday. With a stock-market value of $2.4 billion, Pebblebrook is smaller than LaSalle, at almost $3.4 billion.
Pebblebrook said LaSalle hasn’t responded to its revised offer, sent to the company on April 13, and “continues to refuse to negotiate an agreement to combine the two companies.” LaSalle on March 28 rejected a bid from Pebblebrook, as “insufficient in both price and mix,” and said it would continue to consider any alternatives to enhance long-term value. LaSalle said Monday that it “will carefully review Pebblebrook’s revised proposal.”
In the first week of April, LaSalle sought to negotiate a deal, conditional on Pebblebrook entering into a nondisclosure agreement, according to people with knowledge of the matter. This included a so-called standstill agreement, which would have restricted Pebblebrook from buying or selling shares in LaSalle for three months -- negotiated lower from 18 months -- or making public comments about the deal, said the people, who asked not to be named because the discussions are private. Pebblebrook already owns 4.8 percent of LaSalle shares, it has said.
Pebblebrook has declined to sign an NDA, the people said. Such agreements are commonplace and are made in exchange for access to resources required for due diligence, such as non-public data about the performance of individual hotels. One reason Pebblebrook has not entered into an NDA is that it didn’t believe all the resources it sought would would be provided, one of the people said. This includes an outlook through the end of 2018 by property and a meeting between Pebblebrook’s management team and members of LaSalle’s independent board that would exclude its chief executive officer, since he would not be part of the transaction, the person said.
The two companies were both founded by Jon Bortz, who ran LaSalle Hotel Properties from 2001 to September 2009. He formed Pebblebrook soon after, and expanded the company by scooping up high-quality hotels that were placed on the market after the financial crisis.
In rejecting Pebblebrook’s initial offer, LaSalle also said it believed that its suitor’s shares were overvalued. Pebblebrook has rallied 20 percent over the past 12 months, outperforming both LaSalle’s 4.2 percent gain and the Bloomberg REIT Hotels Index’s 1.2 percent gain.
Some LaSalle shareholders have expressed interest in its sale. HG Vora Capital, LaSalle’s third-biggest shareholder with a 7.1 percent stake, said earlier this month that it intends to engage in discussions with the board, including regarding a potential deal for the company.