LaSalle Decides Pebblebrook’s Offer Is Superior

BETHESDA, MD–It was Pebblebrook Hotel Trust’s last acquisition offer that did the trick for LaSalle Hotel Properties. In mid August Pebblebrook sweetened its bid yet again for its rival hotel REIT and last week LaSalle finally acknowledged that Pebblebrook was in the running, after several refusals to consider its proposals.

Besides LaSalle’s determination that Pebblebrook’s bid could lead to a superior proposal another shift came from shareholder advisory firms Glass Lewis & Co and ISS, both of which recommended last month that LaSalle shareholders oppose the Blackstone deal.

On Wednesday, LaSalle’s board of trustees decided Pebblebrook made a “Superior Proposal” over Blackstone Group’s $4.8 billion offer. ““We look forward to further engaging with LaSalle to quickly execute a merger agreement…” Pebblebrook CEO Jon Bortz said.

Under the terms of the Pebblebrook proposal, it would acquire LaSalle for 0.92 common shares of Pebblebrook per common share of LaSalle, with the option for LaSalle shareholders to elect to receive a fixed amount of $37.80 per share in cash up to a maximum of 30% in aggregate of the consideration, subject to pro ration.

LaSalle also made clear that there can be no assurance that the discussions with Pebblebrook will result in a transaction or that Blackstone won’t increase its own offer.

But it is unlikely that Blackstone will come back with its own sweetened bid sources have told the Wall Street Journal and Reuters.

A Strong Sector

The competition for LaSalle has been in part driven by the hotel industry’s strong fundamentals and rising property valuations. According to CBRE, hotel demand grew 3.1% in Q2 2018, up from the 2.9% rate in Q1. Supply growth, meanwhile, remained at 2%. National occupancy rose by 1.1% year-over-year, continuing a growth trend in quarterly occupancy to record levels.

Separately, Green Street Advisors found that hotel valuations gained more than 5% in the last 12 months.