Bethesda-based LaSalle Hotel Properties is backing out of its proposed merger with Blackstone after persistent and increasing acquisition offers from Pebblebrook Hotel Trust.
LaSalle's board announced Wednesday it voted unanimously that the Aug. 21 bid from its Bethesda neighbor, Pebblebrook, constitutes a "superior proposal," the term used in the Blackstone agreement that allows LaSalle to change course.
Following the board vote, LaSalle notified Blackstone of its intention to terminate the merger agreement, which LaSalle's shareholders had been scheduled to vote on Thursday.
Pebblebrook's offer gives LaSalle shareholders the option to receive up to 30% of their shares in cash at a fixed amount of $37.80/share, with the rest being exchanged for Pebblebrook shares at a 0.92 ratio.
Pebblebrook released a statement praising LaSalle's decision, which came after it rejected several previous offers. It had also campaigned for LaSalle shareholders to vote no during the planned meeting in D.C. Thursday morning.
“We have long been convinced that a strategic combination with LaSalle represents a value-maximizing opportunity for the shareholders of both LaSalle and Pebblebrook, and we are pleased that the LaSalle Board has determined our August 21, 2018 offer is a ‘Superior Proposal,’” Pebblebrook Chairman Jon Bortz said in a release. “We look forward to further engaging with LaSalle to quickly execute a merger agreement that will allow shareholders to maximize immediate and long-term value as we create a new hotel industry leader.”
Pebblebrook first proposed to buy LaSalle in March, starting with an offer for $30/share that LaSalle's board immediately rejected and called "grossly inadequate." It then increased its offer several times, but LaSalle continued to reject the bids and decided in May to move forward on a merger with Blackstone.
The Blackstone offer was an all-cash transaction for $33.50/share. LaSalle said it favored that offer to Pebblebrook's previous bids, which only provided shareholders with 20% cash and the rest in stock, preferring the stability of an all-cash deal.
Pebblebrook then upped its offer to include 30% cash, which appears to have been the tipping point. The REIT already owns of 9.8% of LaSalle's common shares and said it planned to vote against the Blackstone deal and was pushing other investors to do the same. After Pebblebrook's latest offer, two financial advisory firms published reports recommending LaSalle shareholders reject the Blackstone deal. LaSalle's agreement with Blackstone could force it to pay a $112M fee for terminating the deal.
The merger of LaSalle and Pebblebrook would create the nation's third-largest lodging REIT with a combined asset value of $8B. LaSalle owns 41 properties totaling 10,400 rooms in 11 markets, including nine hotels in D.C.
This story will be updated.
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