Pebblebrook increases terms of offer to merge with LaSalle

Increases number of LaSalle common shares that can receive cash to 30 percent of outstanding

Enhanced Pebblebrook offer will remain outstanding assuming blackstone proposal is voted down by lasalle shareholders

Pebblebrook Hotel Trust released a letter dated August 21, 2018 to the Board of Trustees of LaSalle Hotel Properties in which Pebblebrook submitted an enhanced merger proposal for a strategic combination with LaSalle. Under the enhanced terms, Pebblebrook has increased the number of LaSalle common shares that may receive $37.80 in cash per share to up to 30 percent of LaSalle common shares in aggregate, representing a 50 percent increase in the number of shares that may receive cash compared to Pebblebrook’s prior offer. The increased cash component of the Pebblebrook offer provides additional certainty and greater downside protection to LaSalle’s shareholders while also increasing the overall value of the offer. This enhanced proposal was unanimously approved by Pebblebrook's Board of Trustees and will remain outstanding following a rejection by LaSalle shareholders of the proposed transaction between LaSalle and affiliates of The Blackstone Group, which is scheduled to be voted on by LaSalle shareholders on September 6, 2018.

The increased Pebblebrook offer provides LaSalle shareholders with the option to elect to receive for each LaSalle common share they own either a) a fixed amount of $37.80 in cash or b) a fixed exchange ratio of 0.92 Pebblebrook common share. Under the increased terms, the maximum amount of LaSalle shares eligible to receive cash is increased from 20 percent to 30 percent of the outstanding shares, a 50 percent increase, in the aggregate subject to pro rata cutbacks. The $37.80 cash option is $4.30 per share, or 13 percent, higher than the Blackstone cash merger price of $33.50 per share, and represents a strong anchor providing increased downside protection. Based on the closing price per Pebblebrook common share of $39.17 on August 21, 2018, and assuming 30 percent of the LaSalle common shares receive cash in lieu of Pebblebrook common shares, the implied price of the increased Pebblebrook offer is $36.57, or 9.2 percent, above the Blackstone take-under price of $33.50. With the increased cash offering, Pebblebrook common shares would have to decline by $4.76, or 12.2 percent, from the closing price of August 21, in order for the premium of Pebblebrook’s offer to be eliminated. The Pebblebrook proposal takes into account the $112 million cost of the termination fee LaSalle agreed to pay to Blackstone.

“The terms of our enhanced offer are clearly superior to the Blackstone proposal, as was our prior offer. It provides enhanced certainty to LaSalle’s shareholders through the increased fixed-cash portion, which also increases the overall value we are delivering to LaSalle’s shareholders,” said Jon E. Bortz, chairman, president and CEO of Pebblebrook Hotel Trust. “We’ve recently entered into an agreement to sell certain LaSalle properties in connection with the closing of a Pebblebrook-LaSalle merger. These strategic sales will allow us to continue to focus on properties and markets that are core to our go-forward strategy and also enable us to materially increase the cash component of our offer—and the overall value of our offer—without increasing our leverage compared to our prior proposal. For those who receive Pebblebrook shares, our offer continues to provide significant long-term financial and strategic upside opportunity, as well as increased dividend income, neither of which can be matched by the Blackstone take-under. The proceeds from the asset sales will effectively be delivered back to LaSalle shareholders as a benefit through the increased 30 percent cash component of our proposal. This proposal is not contingent on those property sales, and Pebblebrook is prepared to move forward immediately upon acceptance of our proposal by LaSalle’s Board. We strongly encourage LaSalle’s Board to engage in discussions with us to execute a merger agreement and seize this unique opportunity to combine our two companies to create the industry leader that shareholders so strongly desire.”

Raymond James and BofA Merrill Lynch are acting as financial advisors, Hunton Andrews Kurth LLP is acting as legal counsel and Okapi Partners LLC is serving as information agent to Pebblebrook in connection with the proposed transaction.

For more information, please visit investor.pebblebrookhotels.com.

The full text of Pebblebrook’s letter to LaSalle’s Board of Trustees dated August 21, 2018 can be read here.

Source: Pebblebrook Hotel Trust/ Business Wire