BETHESDA, Md.--(BUSINESS WIRE)--
Pebblebrook Hotel Trust (NYSE: PEB) (“Pebblebrook“) today released two
letters, dated March 6, 2018 and March 20, 2018, to LaSalle Hotel
Properties (NYSE: LHO) (“LaSalle”) in which Pebblebrook proposed a
share-for-share merger.
The proposal represented an implied merger price of $30.001
per LaSalle common share, representing a premium of 18.0% to LaSalle's
trailing 10-day VWAP as of March 5, 2018, based on the proposed fixed
exchange ratio of 0.8655 Pebblebrook common shares for each LaSalle
common share. As of the close on March 27, 2018, the implied merger
price was $29.952 per LaSalle common share, representing a
premium of 17.4% to LaSalle’s trailing 10-day VWAP as of March 27, 2018.
As was communicated orally to LaSalle following receipt of LaSalle’s
letter response dated March 22, 2018, Pebblebrook is prepared to engage
in discussions around price and mix of consideration as warranted by due
diligence.
The combination of Pebblebrook and LaSalle would create an industry
leader with a best-in-class portfolio of upscale and luxury independent
and branded hotels and resorts in or near urban markets in the United
States, generate strong cash flow, provide for a more stable dividend to
shareholders and improve liquidity.
“Our shareholders and LaSalle’s shareholders have long encouraged us to
explore a combination to create a stronger industry leader,” said Jon E.
Bortz, Chairman, President and Chief Executive Officer of Pebblebrook
Hotel Trust. “This combination is obvious and has been so for several
years. Our companies have complementary assets and similar strategies,
and we strongly believe bringing our two companies together is in the
best interests of our respective shareholders. We believe the
shareholders of both of our companies should know about this proposal,
and it is our hope that LaSalle will decide to engage with us to reach a
mutually beneficial agreement.”
Raymond James and BofA Merrill Lynch are acting as financial advisors
and Hunton & Williams LLP is acting as legal counsel to Pebblebrook in
connection with the proposed transaction.
The full text of Pebblebrook’s letter to LaSalle dated March 6, 2018, as
well as Pebblebrook’s follow-up correspondence dated March 20, 2018, and
the text of LaSalle’s letter to Pebblebrook, dated March 22, 2018,
follows.
_____________
|
| 1 |
|
Based on the proposed fixed exchange ratio and Pebblebrook’s
trailing 10-day VWAP as of March 5, 2018 |
| 2 | |
Based on the proposed fixed exchange ratio and Pebblebrook’s
trailing 10-day VWAP as of March 27, 2018 |
| |
|
Letter from Pebblebrook to LaSalle dated March
6, 2018
March 6, 2018
Mr. Stuart Scott
Chairman of the Board of Trustees
Mr. Michael Barnello
President, Chief Executive Officer and Trustee
LaSalle
Hotel Properties
7550 Wisconsin Avenue, 10th Floor
Bethesda,
MD 20814
Dear Stuart and Mike,
I have been authorized by Pebblebrook Hotel Trust’s (“Pebblebrook”)
board of trustees to submit to you this offer for a merger transaction
between Pebblebrook and LaSalle Hotel Properties (“LaSalle”). My
management team and I, as well as the trustees of Pebblebrook, have
believed for several years that there would be tremendous benefits from
merging our two companies, both of which have many similarities,
including quality, geography and markets, operators, brands and overall
approach to asset management. An all-equity strategic combination of our
two companies would create the clear industry leader of high-quality
independent and branded hotels that would greatly benefit the
shareholders of both companies. To demonstrate our conviction to this
transaction, we have accumulated a 4.8% position in LaSalle’s common
shares through open-market purchases1.
We believe that the combined company would:
-
Become the clear leader in the lodging REIT sector and the
second-largest lodging REIT as measured by equity market
capitalization;
-
Own the premier, best-in-class portfolio comprised of 69 primarily
upper-upscale and luxury independent and branded hotels and resorts
located in or near key urban markets in the United States;
-
Own a portfolio of hotels and resorts well-diversified by brand and
management company, including a significant number of unique
market-leading independent and branded hotels;
-
Have increased influence and negotiating strength with management
companies and brands;
-
Benefit from similar portfolio strategies that should allow for a
smooth operational transition and the ability to create material cost
synergies to benefit shareholders;
-
Benefit from increased balance sheet flexibility, increasing capacity
for the acquisition or disposition of properties or other
value-enhancing strategies such as share repurchases;
-
Generate strong cash flow, providing for a more stable dividend to
shareholders that would represent a significant premium to the
anticipated LaSalle dividend based on the potential 50% reduction
discussed on LaSalle’s recent year-end earnings call;
-
Provide improved liquidity for shareholders as a result of the larger
shareholder base and increased equity market capitalization;
-
Provide lower costs for debt and preferred equity, and provide a clear
path to public investment-grade debt opportunities;
-
Benefit from the continuity provided by certain LaSalle trustees
joining the combined company’s board of trustees; and
-
Benefit from the well-regarded executive management team of
Pebblebrook, which would lead the combined company and has
demonstrated a track record of creating value, evidenced by the 45%
outperformance of Pebblebrook’s share price (+69%) relative to
LaSalle’s (+24%) since Pebblebrook’s IPO.2
A summary of certain material indicative terms and conditions is as
follows:
|
1.
|
|
Transaction Structure: The combination will be structured as a
tax-free, 100% equity exchange. Pebblebrook will issue new shares to
LaSalle’s shareholders and remain as the surviving ultimate parent
entity. This structure allows LaSalle’s shareholders to participate
as equity holders in the benefits and upside of the combined entity.
|
| |
|
|
2.
| |
Price and Form of Consideration: An implied merger price of $30.00
per share3 for 100% of LaSalle’s outstanding common
shares, paid in Pebblebrook’s common shares utilizing a fixed
exchange ratio. This represents a premium for LaSalle of 17.5% to
its current share price, 18.0% to its 10-Day VWAP, and 7.6% to
Analyst Consensus NAV.4 These premiums are in the top
quartile of premiums paid in public REIT mergers over the last 10
years.5 We believe that you and your fellow trustees and
shareholders should conclude that our proposal represents greater
value than LaSalle could otherwise expect to achieve in the
foreseeable future on a standalone basis.
|
| |
|
|
3.
| |
Financing Sources: Pebblebrook expects to issue its common shares
for the common equity consideration of the transaction and assume
LaSalle’s existing preferred shares, term loans and first mortgage
loans or establish new loans to refinance such indebtedness and will
require no financial contingencies.
|
| |
|
|
4.
| |
Timing: Pebblebrook anticipates that it could complete its due
diligence and negotiate and execute definitive documentation for the
transaction within 30 days with your cooperation. We have the
necessary senior personnel, advisors and resources to complete the
diligence review and documentation in this timeframe. Pebblebrook
further anticipates that the transaction could be consummated as
soon as practicable following the receipt of shareholder approval
from both Pebblebrook and LaSalle, and regulatory and other
approvals.
|
| |
|
|
5.
| |
Due Diligence: Over the last several months, we have reviewed
significant amounts of publicly available information regarding
LaSalle. Consequently, we anticipate being able to conduct our
necessary confirmatory due diligence regarding key financial,
operational, environmental, regulatory, legal and tax aspects of
LaSalle within the relatively short time period set forth in
paragraph 4 above.
|
| |
|
|
6.
| |
Approvals and Conditions: Although a combination as contemplated in
this letter will be subject to the approval of both Pebblebrook’s
and LaSalle’s shareholders, we are confident that the terms set
forth herein would be supported by both sets of shareholders
particularly given the significant shareholder overlap between the
two companies. Our top 100 shareholders (owning 97% of our common
shares) also own 66% of LaSalle’s common shares.6 |
| |
|
|
7.
| |
Exclusivity: Pebblebrook and LaSalle will enter into a customary
exclusivity agreement providing that neither party nor their
respective advisors will solicit or encourage other non-parties to
submit an offer for another transaction for an agreed number of days
from the date of such exclusivity agreement.
|
| |
|
|
8.
| |
Financial and Legal Advisor Contacts: Pebblebrook intends to engage
Raymond James & Associates, Inc. to serve as its financial advisor
and Hunton & Williams LLP to serve as its legal counsel.
|
| |
|
We believe that this proposal represents full and fair value to
LaSalle’s shareholders and a combination has compelling strategic,
operational and financial merit that will maximize long-term value for
shareholders of both companies and sincerely hope that both you and the
other trustees will support this offer.
Pebblebrook is prepared to commence good-faith discussions immediately
with the objective of entering into a definitive agreement and seeking
shareholder approval as quickly as possible. We would appreciate a
response by March 16, 2018 or at your earlier convenience.
Sincerely yours,
Jon E. Bortz
Chairman, President & CEO
Pebblebrook Hotel
Trust
|
| |
| 1 | |
Based on 113.2 million reported shares outstanding on February 13,
2018 |
| 2 | |
Source: SNL Data Source, based on closing prices as of December 8,
2009 and March 5, 2018 |
| 3 | |
Based on a fixed exchange ratio of 0.8655 and Pebblebrook’s 10-Day
VWAP of $34.6613 as of March 5, 2018 |
| 4 | |
Source: Bloomberg and SNL Data Source, as of March 5, 2018 |
| 5 | |
Based on mergers between publicly traded REITs that have closed
since January 1, 2008; excludes mortgage REITs
|
| 6 | |
Source: Capital IQ, as of March 2, 2018 and based on December 31,
2017 filings
|
| |
|
Letter from Pebblebrook to LaSalle dated March
20, 2018
March 20, 2018
Mr. Stuart Scott
Chairman of the Board of Trustees
Mr. Michael Barnello
President, Chief Executive Officer and Trustee
LaSalle
Hotel Properties
7550 Wisconsin Avenue, 10th Floor
Bethesda,
MD 20814
Dear Stuart and Mike,
I am writing in follow-up to our letter addressed to you both dated
March 6, 2018, in which we proposed a merger of our two companies. We
have not yet received a response from you on our proposal and the offer
detailed in that letter, which remain outstanding, other than a brief,
introductory courtesy call from your financial advisors to our financial
advisor acknowledging receipt. As outlined in our prior letter, the
combination of our two companies would create a number of compelling
financial, strategic and operational advantages for LaSalle's
shareholders that far outweigh the opportunities your company and
shareholders would have going forward on a standalone basis.
Furthermore, a merger offers LaSalle's shareholders both a significant
immediate premium to the company's current share price and analysts'
consensus NAV and the opportunity to move forward as shareholders in a
dynamic combined company with an industry-leading portfolio and balance
sheet overseen by a board of trustees drawn from both companies.
Given the similarities of our two companies' strategies, we have
significant and specific knowledge of the properties in your portfolio
and the operational tactics required to maximize cash flow and asset
value. Moreover, our management team has a long track record of success
and has consistently demonstrated the ability to create long-term
shareholder value through multiple market cycles via active asset
management, accretive growth, prudent capital allocation, conservative
balance sheet management and strong, long-standing relationships with
the investment community.
We recognize that aspects of our proposal relating to management of the
combined company create conflicts in your review process, but we are
confident that upon a thorough and independent review, you will conclude
that a merger will significantly increase long-term value for LaSalle's
shareholders, as we believe it will for Pebblebrook's shareholders.
Importantly, we believe that the merger will be enthusiastically
received by the investment community once they are aware of our
proposal. We remain committed to working with you to negotiate and
complete a transaction on an exclusive, confidential and expedited
basis. Our commitment is evidenced by our continued ownership of
approximately 4.8% of LaSalle's common shares.
Time is of the essence. We are available to meet with you at any time to
discuss the proposed transaction and encourage you to engage with us as
soon as possible so that we may share with you in more detail our vision
for the combined company and the powerful financial benefits for your
shareholders.
We look forward to hearing from you.
Jon E. Bortz
Chairman, President & CEO
Pebblebrook Hotel
Trust
Letter from LaSalle to Pebblebrook dated March
22, 2018
March 22, 2018
Jon E. Bortz
Chairman, President & CEO
Pebblebrook Hotel
Trust
7315 Wisconsin Avenue
Suite 1100 West
Bethesda, MD
20814
Jon:
We are writing you on behalf of the Board of Trustees of LaSalle Hotel
Properties (the "Board") in response to the unsolicited proposal set
forth in your letter dated March 6, 2018 and your subsequent letter
dated March 20, 2018. The Board takes its fiduciary duties to its
shareholders very seriously. The Board, in consultation with its
financial and legal advisors, Citigroup Global Markets Inc., Goldman
Sachs & Co. LLC, and Goodwin Procter LLP, has thoroughly analyzed your
proposal.
After careful consideration, the full Board has unanimously determined
that your proposal is insufficient from both a price and mix of
consideration perspective and is therefore not in the best interests of
LaSalle Hotel Properties shareholders.
Accordingly, the Board has unanimously rejected your proposal.
Sincerely,
Mr. Stuart Scott
Chairman of the Board of Trustees
Mr. Michael Barnello
President, Chief Executive Officer and Trustee
About Pebblebrook Hotel Trust
Pebblebrook Hotel Trust is a publicly traded real estate investment
trust (“REIT”) organized to opportunistically acquire and invest
primarily in upper upscale, full-service hotels located in urban markets
in major gateway cities. The Company owns 28 hotels, with a total of
6,972 guest rooms. The Company owns hotels located in 9 states and the
District of Columbia, including: Los Angeles, California (Beverly Hills,
Santa Monica and West Hollywood); San Diego, California; San Francisco,
California; Washington, DC; Coral Gables, Florida; Naples, Florida;
Buckhead, Georgia; Boston, Massachusetts; Minneapolis, Minnesota;
Portland, Oregon; Philadelphia, Pennsylvania; Nashville, Tennessee;
Columbia River Gorge, Washington; and Seattle, Washington. For more
information, please visit us at www.pebblebrookhotels.com
and follow us on Twitter at @PebblebrookPEB.
ADDITIONAL INFORMATION
This communication does not constitute an offer to buy or solicitation
of an offer to sell any securities. This communication relates to a
proposal which Pebblebrook has made for a business combination
transaction with LaSalle. In furtherance of this proposal and subject to
future developments, Pebblebrook (and, if a negotiated transaction is
agreed, LaSalle) may file one or more registration statements, proxy
statements, tender offer statements or other documents with the United
States Securities and Exchange Commission (the “SEC”). This
communication is not a substitute for any proxy statement, registration
statement, tender offer statement, prospectus or other document
Pebblebrook or LaSalle may file with the SEC in connection with the
proposed transaction. INVESTORS AND SECURITY HOLDERS OF PEBBLEBROOK AND
LASALLE ARE URGED TO READ ANY SUCH PROXY STATEMENT, REGISTRATION
STATEMENT, TENDER OFFER STATEMENT, PROSPECTUS AND OTHER DOCUMENTS FILED
WITH THE SEC CAREFULLY IN THEIR ENTIRETY IF AND WHEN THEY BECOME
AVAILABLE AS THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED
TRANSACTION. Any definitive proxy statement or prospectus (if and when
available) will be mailed to shareholders of LaSalle or Pebblebrook, as
applicable. Investors and security holders will be able to obtain free
copies of these documents (if and when available) and other documents
filed with the SEC by Pebblebrook through the website maintained by the
SEC at http://www.sec.gov.
Pebblebrook or LaSalle and their respective trustees and executive
officers and other members of management and employees may be deemed to
be participants in the solicitation of proxies in respect of the
proposed transaction. You can find information about Pebblebrook’s
executive officers and trustees in Pebblebrook’s definitive proxy
statement filed with the SEC on April 28, 2017. You can find information
about LaSalle’s executive officers and trustees in LaSalle’s definitive
proxy statement filed with the SEC on March 22, 2018. Additional
information regarding the interests of such potential participants will
be included in one or more registration statements, proxy statements,
tender offer statements or other documents filed with the SEC if and
when they become available. You may obtain free copies of these
documents using the sources indicated above.
This document shall not constitute an offer to sell or the solicitation
of an offer to buy any securities, nor shall there be any sale of
securities in any jurisdiction in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the
securities laws of any such jurisdiction. No offering of securities
shall be made except by means of a prospectus meeting the requirements
of Section 10 of the U.S. Securities Act of 1933, as amended.
Forward-Looking Statements
This communication may include “forward-looking statements” within the
meaning of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements include, but are not limited to, statements
regarding Pebblebrook’s offer to acquire LaSalle, its financing of the
proposed transaction, its expected future performance (including
expected results of operations and financial guidance), and the combined
company’s future financial condition, operating results, strategy and
plans. Forward-looking statements may be identified by the use of the
words “anticipates,” “expects,” “intends,” “plans,” “should,” “could,”
“would,” “may,” “will,” “believes,” “estimates,” “potential,” “target,”
“opportunity,” “tentative,” “positioning,” “designed,” “create,”
“predict,” “project,” “seek,” “ongoing,” “upside,” “increases” or
“continue” and variations or similar expressions. These statements are
based upon the current expectations and beliefs of management and are
subject to numerous assumptions, risks and uncertainties that change
over time and could cause actual results to differ materially from those
described in the forward-looking statements. These assumptions, risks
and uncertainties include, but are not limited to, assumptions, risks
and uncertainties discussed in Pebblebrook’s most recent annual or
quarterly report filed with the SEC and assumptions, risks and
uncertainties relating to the proposed transaction, as detailed from
time to time in Pebblebrook’s and LaSalle’s filings with the SEC, which
factors are incorporated herein by reference. Important factors that
could cause actual results to differ materially from the forward-looking
statements made in this communication are set forth in other reports or
documents that Pebblebrook may file from time to time with the SEC, and
include, but are not limited to: (i) the ultimate outcome of any
possible transaction between Pebblebrook and LaSalle, including the
possibilities that LaSalle will reject a transaction with Pebblebrook,
(ii) the ultimate outcome and results of integrating the operations of
Pebblebrook and LaSalle if a transaction is consummated, (iii) the
ability to obtain regulatory approvals and meet other closing conditions
to any possible transaction, including the necessary shareholder
approvals, and (iv) the risks and uncertainties detailed by LaSalle with
respect to its business as described in its reports and documents filed
with the SEC. All forward-looking statements attributable to Pebblebrook
or any person acting on Pebblebrook’s behalf are expressly qualified in
their entirety by this cautionary statement. Readers are cautioned not
to place undue reliance on any of these forward-looking statements.
These forward-looking statements speak only as of the date hereof.
Pebblebrook undertakes no obligation to update any of these
forward-looking statements to reflect events or circumstances after the
date of this communication or to reflect actual outcomes.
For additional information or to receive press releases via email,
please visit our website at www.pebblebrookhotels.com
View source version on businesswire.com: https://www.businesswire.com/news/home/20180328005384/en/
Pebblebrook Hotel Trust
Jon E. Bortz, 240-507-1300
Chairman
and Chief Executive Officer
or
Sard Verbinnen & Co
Liz
Zale, Pam Greene or Stephen Pettibone, 212-687-8080
Source: Pebblebrook Hotel Trust