LaSalle Picks Blackstone's $4.8 Billion Bid Over Pebblebrook

(Bloomberg) -- LaSalle Hotel Properties picked Blackstone Group LP as its preferred suitor, thwarting months of efforts by Pebblebrook Hotel Trust to buy the luxury-hotel owner, most recently for more than $4 billion.

The Blackstone transaction values the company at $4.8 billion, LaSalle said Monday in a statement. LaSalle’s board deemed a June 11 offer from Pebblebrook “substantially similar” to one it rejected before accepting Blackstone’s bid of $33.50 a share. Pebblebrook’s offer “does not constitute, and could not reasonably be expected to lead to, a superior proposal” to Blackstone’s, the company said in the statement.

In a separate statement Monday, Pebblebrook said it increased its stake in LaSalle to about 9 percent and that its offer “represents the greatest value-maximizing opportunity for the shareholders” of both companies.

Pebblebrook’s offer remains mainly stock-based. Because the value of that stock could fluctuate, and Pebblebrook has so far declined to include a price-protection mechanism, such as a collar, the bid exposes LaSalle shareholders to a kind of uncertainty that Blackstone’s all-cash offer eliminates, according to the statement.

To be completed, the Blackstone deal now needs approval from two-thirds of LaSalle’s shareholders. Pebblebrook could also raise its offer again.

Pebblebrook’s revised proposal was similar to one it disclosed last month. The fresh bid still called for a fixed exchange ratio of 0.92 Pebblebrook shares for each LaSalle share. But it locked in a cash value of $37.80, based on its five-day volume-weighted average price through June 8, that investors could opt to receive, capped at 20 percent of the deal’s value. Previously, that amount was $35.03. The revised offer also took into account the $112 million termination fee LaSalle would have had to pay Blackstone.

Pebblebrook’s ‘Determination’

Pebblebrook Chairman Jon Bortz said in Monday’s statement that the company’s “large, increased ownership position further demonstrates our commitment and determination to complete this combination.”

Northwood Investors and Starwood Capital Group also weighed offers for LaSalle, according to people familiar with the matter. The firms are the bidders referred to as Party A and Party B, respectively, in a regulatory filing Monday by LaSalle, the people said. Starwood Capital presented a written offer for the hotel company valuing it at $32 a share but didn’t improve its price and was “significantly behind” Blackstone and Pebblebrook in its evaluation of LaSalle, so those talks ultimately ended, according to the filing.

Representatives for Northwood and LaSalle declined to comment on the identities of the parties. A representative for Starwood didn’t return a call.

The prospect of a Pebblebrook deal has helped LaSalle’s stock stay consistently above Blackstone’s $33.50-a-share offer since that deal was announced on May 21. HG Vora Capital Management LLC, LaSalle’s third-largest shareholder, with a 9.1 percent stake, said last week that it viewed Pebblebrook’s offer as superior.

A deal between the two hotel companies, both based in Bethesda, Maryland, would have combined LaSalle’s 41 hotels -- including Gild Hall and the Roger in New York, L’Auberge Del Mar in California and the Marker San Francisco -- with Pebblebrook’s 28 properties.

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