LaSalle Hotel Properties Rises 5% on Blackstone Takeover

Companies enter $4.8 billion deal

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May 22, 2018
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Real estate investment trusts started the week of May 21 off strong, with LaSalle Hotel Properties (LHO, Financial) leading the way with a 5.33% gain. The REIT is the owner of 41 hotels in the United States that span 11 key markets.

The company announced on Monday it is accepting a $4.8 billion takeover offer from Blackstone Group LP (BX, Financial).

LaSalle's stock has rallied over the past month, rising 7.9% on a potential deal as more than 20 companies courted it. Other companies vying for the REIT included Pebblebrook Hotel Trust (PEB, Financial), which offered to acquire the company for 20% in cash and the remainder in stock. Pebblebrook's offer of $35.89 per share was higher than Blackstone Group's offer of $33.50 per share based on Friday's close.

Blackstone's deal, which is just 5% more than LaSalle's closing price on Friday, was accepted due to an immediate and certain cash value being offered.

Pebblebrook initially offered $31.75 per a share on April 20 before the bid was rejected, with LaSalle claiming it greatly undervalued the company.

Blackstone has a team of real estate agents and is known to acquire properties, real estate holdings and hotels at discount rates. The company then restructures the properties and sells them at a profit.

In addition to facing regulators, the deal must be approved by two-thirds of the company's shareholders.

LaSalle reported its first-quarter earnings before the opening bell on May 10. The company's results beat Wall Street's expectations, with the REIT posting $34.2 million in funds from operations, or 30 cents per share. Analysts expected 27 cents.

The company's net earnings came in at a loss of $11.1 million, or 10 cents per share. The trust posted revenue of $223 million for the first quarter, which beat estimates of $217.6 million. LaSalle's per-share estimates for the coming quarter, ending in July, are 74 cents to 76 cents.

Full-year funds are expected to be in the range of $2.15 to $2.17 per share.

LaSalle's stock was up 0.57% on Tuesday morning. Pebblebrook's shares were down 0.40%.

LaSalle is under an agreement with Blackstone to not solicit or sign any further agreements with other parties regarding an acquisition. LaSalle can discuss an unsolicited bid in the meantime. If LaSalle breaks the agreement, it will be required to pay a $112 million termination fee. Blackstone would be required to pay a $336 million fee.

Disclosure: The author does not have any stakes in the listed equities.