Pebblebrook Revises LaSalle Offer in Tussle With Blackstone

(Bloomberg) -- Pebblebrook Hotel Trust is stepping up its efforts to acquire larger rival LaSalle Hotel Properties.

The company made a fresh offer in writing that reflects its share gains since its bid last month, according to a Pebblebrook statement Monday. Bloomberg News reported on Thursday that the earlier proposal was only made verbally. LaSalle had rejected it and accepted an all-cash deal from Blackstone Group LP.

A combination of Pebblebrook and LaSalle, both based in Bethesda, Maryland, and founded by Jon Bortz, would bring together LaSalle’s 41 hotels with 28 owned by Pebblebrook, including the Sir Francis Drake in San Francisco, W hotels in Boston and Los Angeles, and the Mondrian Hotel in West Hollywood, California.

Bortz said in an interview that he had been in dialogue with investors of both Pebblebrook and LaSalle.

“There’s been a great level of enthusiasm from both sets of investors for our offer and our desire to put the two companies together, and the stock reactions prove that,” he said.

Pebblebrook’s proposal is similar to what was disclosed by the company last month. It still calls for a fixed exchange ratio of 0.92 Pebblebrook shares for each LaSalle share. Pebblebrook’s offer is valued at $37.80, based on the company’s five-day volume weighed average price. Investors will also be able to opt to receive that fixed amount in cash up to a limit of 20 percent of the deal’s value. Previously, that amount was $35.03. The offer takes into account the $112 million termination fee LaSalle would have to pay Blackstone.

The revised offer was reported earlier Monday by Bloomberg.

Dueling Values

LaSalle said in a statement Monday that it will review Pebblebrook’s new proposal to determine the course of action in the best interest of investors. The company previously said it chose the Blackstone offer because it gave shareholders the most “certain cash value.”

Pebblebrook, which has said it owns 4.8 percent of LaSalle, has hired Okapi Partners LLC to facilitate conversations with investors. Approval from two-thirds of LaSalle shareholders is required for the Blackstone deal to proceed.

Okapi has been hired initially to determine who the current shareholders are and communicate the benefits of its offer, Bortz said.

“We’re not conducting a proxy battle at this time, but this doesn’t preclude us from doing that down the road,” he said.

Vying for LaSalle

Since May 21, when the deal with Blackstone was announced, LaSalle’s shares have consistently traded higher than the $33.50 that the alternative asset manager agreed to pay. They closed at $35.19 on June 8. That’s in part because Pebblebrook management conveyed to investors and analysts at two industry conferences last week that they’re still in the running for LaSalle, according to several research notes, including one from SunTrust Robinson Humphrey.

“Investors appear to have voted for the logic of combining these similar portfolios, and Pebblebrook management will have to work to harvest operational synergies if its bid proves successful,” Boenning & Scattergood Inc. analyst Floris van Dijkum said in a separate note published on June 8. In that note, van Dijkum said he expects Pebblebrook to formalize its bid.

Pebblebrook’s attempts to acquire LaSalle, which formally began in March, led the company to explore alternatives.

©2018 Bloomberg L.P.

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