LaSalle Hotel Properties moved to terminate a planned buyout by Blackstone Group LP after determining that an unsolicited merger offer from Pebblebrook Hotel Trust is a superior proposal.
LaSalle, a real estate investment trust, agreed in May to be acquired by Blackstone for $33.50 per share in an all-cash, $4.8 billion transaction, and the company's shareholders were scheduled to vote on the proposed deal Sept. 6. Pebblebrook, another REIT, aggressively promoted its own cash-and-stock offer for LaSalle in recent months, and several prominent LaSalle shareholders, along with two proxy advisory firms, criticized the Blackstone deal in the weeks leading up to the planned vote.
LaSalle had rebuffed earlier offers from Pebblebrook, arguing that the all-cash bid from Blackstone offered greater certainty and more predictable value than Pebblebrook's proposal. Pebblebrook amended its terms Aug. 21 to increase the cash component of its bid, and LaSalle responded Aug. 27 by saying the revised proposal could reasonably be expected to lead to a superior offer.
In a news release just over a week later, LaSalle said its board voted unanimously — with the exception of trustee Stuart Scott, who was not in attendance because of a recent hospitalization — to deem Pebblebrook's offer a superior proposal, as defined in the company's merger agreement with Blackstone Real Estate Partners VIII, a Blackstone fund.
The Pebblebrook offer calls for the company to acquire LaSalle by exchanging 0.92 of a Pebblebrook common share for each LaSalle share, with the option for LaSalle shareholders to elect to receive a fixed amount of $37.80 per share in cash for up to 30% of the aggregate consideration.
LaSalle notified Blackstone of its decision, which began a four-business-day period during which the LaSalle board may not change its recommendation, LaSalle may not terminate the Blackstone agreement, and Blackstone may propose amendments to its agreement.
In August, after the latest revision of Pebblebrook's offer, Bloomberg News reported that Blackstone did not intend to raise its own bid, citing a person familiar with the matter.
In a separate news release, Pebblebrook Chairman, President and CEO Jon Bortz said the company has "long been convinced that a strategic combination with LaSalle represents a value-maximizing opportunity" for shareholders of both companies.
"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," Bortz added.
Under LaSalle's agreement with Blackstone, the company is required to pay a $112 million termination fee to Blackstone if the transaction is dissolved under certain circumstances.
Raymond James and BofA Merrill Lynch are acting as Pebblebrook's financial advisers, Hunton Andrews Kurth LLP is serving as its legal counsel, and Okapi Partners LLC is serving as information agent to Pebblebrook.
Citigroup Global Markets Inc. and Goldman Sachs & Co. LLC are acting as LaSalle's financial advisers, and Goodwin Procter LLP and DLA Piper LLP (US) are serving as its legal counsel.