BETHESDA, MD—RLJ Lodging Trust said Friday it had completed its merger with FelCor Lodging Trust Inc., a $7-billion stock-for-stock transaction first announced in April. Shareholders of both companies approved the union creating the third largest pure-play lodging REIT on August 15, despite analysts' concerns that RLJ was paying too high a price for FelCor.
Ross H. Bierkan, RLJ's president and CEO, will lead the combined company along with executive chairman Robert L. Johnson and COO/CFO Leslie D. Hale. Patricia L. Gibson, formerly a FelCor director, has joined RLJ's board, which now numbers eight with the addition of Gibson.
“Over the coming months we look forward to realizing the benefits of our expanded platform and executing our strategic plan to drive long-term shareholder value,” says Bierkan. He adds that the merger creates “the preeminent lodging REIT in the upscale focused-service and compact full-service space.”
In an updated investor presentation, RLJ calls its investment focus the most profitable part of the lodging spectrum, which ranges from budget & economy at one end to luxury at the other, and says that emphasizing the focused-service and compact full service segments generates significantly higher margins than its peers. The FelCor portfolio's 30 compact full-service hotels, which greatly outnumber its six traditional full-service properties, “are a natural fit with RLJ's strategy,” according to the investor presentation.
The addition of the FelCor portfolio will nearly double RLJ's share of pro forma EBITDA from the compact full-service segment to 44%, compared to 23% pre-merger. It will also boost the combined company's pro forma EBITDA per compact full-service hotel from $4.9 million to $5.9 million, according to RLJ.
Shares of FelCor have ceased trading on the New York Stock Exchange. The combined company is continuing to trade under the existing RLJ ticker on the NYSE. Barclays acted as financial advisor, while Hogan Lovells and Arent Fox acted as legal advisors to RLJ in connection with the merger.
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
