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Park Hotels & Resorts closes $2.5B Chesapeake Lodging Trust acquisition

Park Hotels & Resorts Inc. completed the acquisition of Chesapeake Lodging Trust at a total transaction value of approximately $2.5 billion, inclusive of costs.

The deal, approved by Chesapeake shareholders on Sept. 10, pushes the total enterprise value of Park Hotels to over $10 billion.

As part of the transaction, each Chesapeake share was converted into the right to receive $11 in cash and 0.628 of a share of Park common stock. Upon closing, about 240 million Park Hotels shares were outstanding. Former Chesapeake shareholders now own approximately 16% and existing Park stockholders own approximately 84% of the combined company's common equity.

Park used the $850 million five-year tranche from its existing unsecured delayed-draw term loan agreement and terminated the commitment with respect to the $100 million two-year tranche. Proceeds are being used to pay a portion of the merger consideration and to clear around $352 million of Chesapeake's debt, including its $225 million term loan facility and two property mortgages maturing in 2020.

Park also assumed $310 million of existing mortgage loans secured by four of Chesapeake's properties, and Chesapeake's interest rate swap agreement on a $225 million loan.

Park now has a total of $4.3 billion of outstanding debt, including $234 million of unconsolidated joint venture debt. It also has over $1.2 billion in liquidity comprising cash on hand and a $1 billion undrawn revolver.

Before closing the deal, Chesapeake completed the $138 million sale of Hyatt Herald Square-New York and Hyatt Place-New York Midtown South. As a result, approximately $85 million of mortgage debt was defeased.

The deal value was based on Park's closing stock price as of Sept. 17. Park Hotels was added to the S&P MidCap 400 Index immediately, while the common shares of Chesapeake ceased trading on the New York Stock Exchange before the market opened on Sept. 18.

BofA Merrill Lynch and Barclays acted as financial advisers and Hogan Lovells acted as legal counsel to Park. J.P. Morgan Securities LLC acted as exclusive financial adviser and Paul Weiss Rifkind Wharton & Garrison LLP and Polsinelli PC acted as legal counsel to Chesapeake.

Thomas Natelli and Thomas Eckert of Chesapeake will join the board of Park Hotels, expanding it to 10 members.

Park Hotels now has 66 hotels with over 35,000 rooms in prime city center and resort locations.