Blackstone Wins Bidding War To Acquire LaSalle Hotels For $4.8B
Pebblebrook Hotel Trust, another Bethesda-based REIT, made an initial offer to buy LaSalle for $30/share in March. LaSalle immediately rejected that offer, but Pebblebrook followed up with additional offers of $31.75/share and $32.49/share.
LaSalle decided to test the waters, contacting 20 other potential buyers during its review of the Pebblebrook offer, the company's board chairman said in a statement Monday. Ten of those potential buyers executed confidentiality agreements to receive private information. LaSalle says its board engaged in lengthy negotiations over price and terms.
"After careful consideration of multiple proposals received, the Board determined that this transaction represents the most compelling opportunity for LaSalle's shareholders, delivering a significant premium with immediate and certain cash value," LaSalle Board Chairman Stuart L. Scott said in the release.
LaSalle highlighted that the Blackstone offer represents a 35% premium over its $24.84 share price on March 27, before the initial Pebblebrook offer caused it to rise. LaSalle’s share price closed Friday at $31.92, and has risen significantly Monday following the Blackstone news. As of 1 p.m. ET, LaSalle was trading at $33.70/share, up 5.6% on the day.
LaSalle expects the deal to close in the third quarter. The company's portfolio consists of 41 properties totaling 10,400 rooms in 11 markets, including nine in D.C.
Pebblebrook signaled Monday morning that it is not giving up. Following the news of the Blackstone deal, Pebblebrook released a statement with a new offer significantly higher than its previous public offer and above the valuation agreed to with Blackstone.
Pebblebrook proposed a deal to buy LaSalle in a transaction that would value LaSalle at $35.89/share, though 80% of the purchase would be made with Pebblebrook shares and just 20% in cash. It boasted that this represented a 7.1% premium over Blackstone’s offer.
“Our offer is substantially superior to the merger agreement that LaSalle has reached with Blackstone,” Pebblebrook Chairman John Bortz said in a release. “We continue to believe that our offer maximizes immediate and long-term value for LaSalle’s shareholders.”
But a source familiar with the deal tells Bisnow that Pebblebrook had already introduced this latest offer during the private negotiation process, and LaSalle’s board had considered it and decided to go with the greater stability of Blackstone’s all-cash deal.
The valuation of Pebblebrook's offer is based on the current price of its stock, which Monday reached its highest point since July 2015. A drop in its share price ahead of an acquisition closing would decrease the deal's valuation and reduce the payout LaSalle's investors would receive.
Robert W. Baird Senior Research Analyst Michael Bellisario said LaSalle signaled throughout the process it would prefer to be acquired in a cash transaction rather than for stock consideration, as Pebblebrook has structured each of its offers. Bellisario also notes that the LaSalle-Blackstone deal includes a standard “no-shop” provision, requiring LaSalle to pay a $112M fee, roughly $1/share, if the deal is terminated.
“Blackstone is a pretty credible buyer; they can move quickly, and there’s no financing contingency,” Bellisario said. “I don’t recall a time when a pending Blackstone transaction was topped.”
Citigroup Global Markets and Goldman Sachs acted as LaSalle’s financial advisors in the deal, with Goodwin Procter and DLA Piper serving as its legal counsel. Morgan Stanley, JPMorgan and Eastdil Secured advised Blackstone, while Simpson Thacher & Bartlett was its legal representative.
UPDATE, MAY 21, 1:30 P.M ET: This story has been updated to include the latest information on Pebblebrook's revised offer and additional background.