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Pebblebrook Raises Bid for LaSalle Buyout, Keeps Battle Alive

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Pebblebrook Hotel Trust (PEB - Free Report) has kept alive the buyout battle for LaSalle Hotel Properties (LHO - Free Report) by enhancing its bid for the latter.

The latest offer represents an implied price of $37.80 per LaSalle common share and provides a premium of 13% over affiliates of Blackstone Group LP’s (BX - Free Report) offer of $33.50. Moreover, it takes into account the $112-million termination fee that LaSalle needs to pay to Blackstone in case the deal is called off.

Particularly, for each share of LaSalle they own, shareholders have the option to elect to receive 0.92 of a Pebblebrook share or a fixed per share cash amount of $37.80, subject to a cap of 20% in aggregate of the consideration (pro ration if oversubscribed).

LaSalle has assured reviewing the proposal of Pebblebrook and do whatever will be in the best interest of its shareholders.

Notably, for quite some time Pebblebrook has been in pursuit of the buyout of LaSalle Hotel Properties that owns 41 upscale hotels in 11 markets across seven states and the District of Columbia. In April, the company made an offer to acquire LaSalle in a cash-and-stock deal with consideration of 0.9085 common shares of Pebblebrook per common share of LaSalle, representing an implied price of $32.49 per share.

The offer was outbid by private equity behemoth Blackstone Group LP when it agreed to acquire all outstanding common shares of LaSalle for $33.50 per share, in an all-cash deal, valuing the acquisition at $4.8 billion. LaSalle Hotel Properties and affiliates of Blackstone Group LP reached a definitive agreement for the same and then the buyout battle for LaSalle Hotel Properties seemed to have finally ended.

However, Pebblebrook claims to make a “value-maximizing opportunity” for both LaSalle and Pebblebrook shareholders with its latest offer and expects the combined company to well capitalize on the improving fundamentals of the lodging industry.

Per Jon E. Bortz, chairman, president and chief executive officer of Pebblebrook Hotel Trust, “The stock consideration offers LaSalle’s shareholders a more attractive opportunity from a tax perspective, and for those shareholders who want cash, the market has demonstrated that there is substantial liquidity at prices significantly above the Blackstone offer.”

Especially, an improving economy, growth in employment and rise in wages are likely to drive demand for hotels. Particularly, improved business travel demand with lower cancellations and higher group spends, as well as elevated demand from the leisure division signal better prospects for hotel REITs like Pebblebrook, LaSalle and Host Hotels & Resorts, Inc. (HST - Free Report) .

Amid this, the buyout of LaSalle by Pebblebrook, which currently owns 28 hotels in nine states and the District of Columbia, would enhance its scale significantly and help leverage on the improving fundamentals.

Currently, Pebblebrook carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The company’s shares have appreciated 12.4% in the past three months compared with its industry’s growth of 4.7%.

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