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LaSalle Hotel Properties Board of Trustees Rejects Unsolicited Proposal from Pebblebrook Hotel Trust

Grossly Inadequate Proposal Significantly Undervalues LaSalle and is Not in the Best Interests of Shareholders – LaSalle Reiterates Confidence in its Ability to Deliver Exceptional Value to Shareholders – Emphasizes Commitment to Previously Announced Share Repurchase Program – Announces Dividend Policy for 2018

LaSalle Hotel Properties (NYSE: LHO) today confirmed that its Board of Trustees unanimously rejected an unsolicited proposal received on March 6, 2018 from Pebblebrook Hotel Trust (NYSE: PEB) to acquire all outstanding shares of LaSalle in an all-stock transaction with consideration of 0.8655 common shares of Pebblebrook per common share of LaSalle.

In consultation with its financial and legal advisors, the Board thoroughly analyzed the proposal and concluded that it is insufficient in both price and mix of consideration and is not in the best interests of the Company’s shareholders.

“Consistent with our fiduciary duties, the Board has taken the time to carefully evaluate the proposal and the future potential of a combined company, and we have concluded that the proposal is grossly inadequate and is, therefore, not in the best interests of our shareholders,” said Stuart L. Scott, Chairman of the Board. “The Board is focused on the continued execution of our strategic plan, prudent capital allocation, and our superior hotel portfolio, which will deliver greater value, sooner to our shareholders than Pebblebrook’s low-premium proposal.”

Mr. Scott continued, “With our outstanding assets, solid balance sheet and strong cash flow, we are well-positioned to execute strategically on near-term and long-term opportunities, which will enable us to drive growth and return capital to shareholders through dividends and share repurchases. Of course, the Board continues to be open-minded and will consider any alternatives that enhance long-term shareholder value; however, this proposal does not achieve that objective.”

Graph - LaSalle Hotel Properties Performance

Rationale for Unanimous Rejection of Pebblebrook’s Proposal

In reaching its conclusion, the Board considered a number of factors, including:

Superior Value Creation from LaSalle’s Current Plan

The Board considered the proposal relative to the strength of the Company’s current operating plan and financial position, as well as the Company’s ability to execute strategically through continued prudent capital allocation, including:

Pebblebrook Executives’ Potential Payouts and Self-Serving Agenda

LaSalle is surprised that Pebblebrook has not waived “change in control” payments to Pebblebrook executives in connection with this proposed transaction. Under the terms of the Pebblebrook proposal, existing Pebblebrook shareholders would own less than 50% of the combined entity, which would constitute a change in control under Pebblebrook’s equity incentive plan, share award agreements and change in control severance agreements. As a result, the transaction would trigger immediate vesting of outstanding equity awards held by Pebblebrook’s executives and the payment of cash stay bonuses to Pebblebrook’s executives on the first anniversary of the transaction, with aggregate values of approximately $29 million and $4.5 million, respectively, according to Pebblebrook’s definitive proxy statement filed on April 28, 2017. Moreover, in lieu of such cash stay bonuses, Pebblebrook’s executives could be entitled to the payment of cash severance payments in an aggregate amount of approximately $21.6 million (including tax gross ups) in the event of termination without cause or resignation for good reason within a year following the transaction.

LaSalle Announces 2018 Dividend Policy

LaSalle today also announced its dividend policy for the remaining quarters of 2018. Pursuant to the dividend policy, the Company expects to pay a quarterly dividend of $0.225 per common share of beneficial interest for each of the quarters ending June 30, 2018, September 30, 2018 and December 31, 2018.

As previously announced on March 15, 2018, the Company declared a quarterly dividend of $0.45 per common share of beneficial interest for the quarter ending March 31, 2018. The first quarter dividend will be paid on April 16, 2018 to common shareholders of record as of March 29, 2018.

To the extent that the regular quarterly dividends for 2018 do not satisfy the annual distribution requirements under the REIT provisions of the Internal Revenue Code, the Company expects to satisfy the annual distribution requirements by paying a special dividend in January 2019.

The adoption of a dividend policy does not commit the Company to declare future dividends at the expected levels, or at all. The timing, form and amount of any future dividends will be in the discretion of the Board and will depend upon the Company’s cash flow, financial condition and capital expenditure requirements, the annual REIT distribution requirements and other factors that the Board deems relevant.

Citigroup Global Markets Inc. and Goldman Sachs & Co. LLC are acting as financial advisors to LaSalle and Goodwin Procter LLP and DLA Piper LLP (US) are acting as legal counsel.

Posted by on March 28, 2018.

Categories: Development

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