In a note to clients, Deutsche Bank analyst David Loeb says the offer provides a significant premium but not a significant multiple, so he's recommending a hold until the dust settles. "We are maintaining our Outperform rating and $11 price target on Red Lion," he says. "In light of the offer, we expect the shares to trade up, but do not expect the market will discount full franchise value."

SEC filings show that private discussions between Columbia Pacific and the Red Lion board began in April but were broken off by Red Lion without agreement on a buy-out, according to Loeb. "As such, we expect this is likely just the beginning of the story," he writes.

Given that Red Lion's capital structure does not leave significant room for additional debt in a take-private, Loeb says the buyout likely would require equity of approximately $175 million. Other potential buyers could include Carlson Hotels, Choice, Wyndham or, secondarily, Intercontinental or Global Hyatt.

That having been said, he adds that RLH's board and management has desired to remain on-course with its public strategy. "We believe the board believes Red Lion can create substantial shareholder value by increasing the geographic distribution of the brand through ownership, joint ventures, and franchising," Loeb states. "The brand's regional size might be a bit of a work-in-progress before its value is maximized, which would be the board's case should it reject the public offer."

Columbia Pacific Opportunity Fund LP includes Alexander B. Washburn, Daniel R. Baty, Stanley L. Baty and Brandon D. Baty. The principal business address of the Reporting Persons is 1910 Fairview Avenue East, Suite 500, Seattle, Washington 98102. Columbia Pacific Advisors LLC serves as the investment manager of Columbia Pacific Opportunity Fund. Washburn and the Batys serve as the managing members of the CPA and are primarily responsible for all investment decisions regarding each Fund's investment portfolio.