LaSalle Hotel is reconsidering its planned takeover by Blackstone

[NEW YORK] LaSalle Hotel Properties, which spurned a bid by Pebblebrook Hotel Trust to accept a takeover offer from Blackstone Group LP, is rethinking its decision.

The latest version of Pebblebrook's bid, from last week, may lead to a superior proposal to the agreement reached with Blackstone, a determination made unanimously by LaSalle's board, the company said in a statement Monday. Under the terms of the deal with Blackstone, LaSalle is able to consider such offers.

LaSalle is now allowed to "engage in discussions with Pebblebrook in accordance with the terms of the Blackstone merger agreement," the Bethesda, Maryland-based company said in the statement. "There can be no assurance that the discussions with Pebblebrook will result in the board's determination that the Pebblebrook proposal is a superior proposal or the consummation of a transaction that is superior to the pending transaction with Blackstone."

LaSalle agreed in June to be acquired by Blackstone for $33.50 a share in cash, or roughly US$3.7 billion, thwarting months of efforts by Pebblebrook to buy the luxury-hotel owner. Pebblebrook's latest bid is to buy LaSalle for a mix of cash and stock, offering LaSalle investors 0.92 common share for each LaSalle share, with the option of receiving US$37.80 a share in cash for as much as 30 per cent of the stock.

Blackstone has decided not to raise its offer for LaSalle, according to a person with knowledge of the matter. It'll walk away with a US$112 million breakup fee if LaSalle reaches an agreement with Pebblebrook. A Blackstone representative declined to comment.

Late last week, two prominent shareholder-advisory firms - Institutional Shareholder Services Inc and Glass, Lewis & Co - issued reports recommending that LaSalle shareholders oppose Blackstone's all-cash offer, arguing that Pebblebrook's bid is superior.

Pebblebrook, which owns 9.8 per cent of LaSalle, said it will vote against Blackstone's bid. HG Vora Capital Management LLC, which had 9.1 per cent of LaSalle's shares when the Blackstone offer was accepted, also has said that it plans to vote against the deal because it doesn't maximize value for shareholders and that the Pebblebrook bid is superior. The Blackstone takeover needs approval from investors representing two-thirds of LaSalle's shares.

"We are pleased with the decision" by LaSalle's board, Pebblebrook Chief Executive Officer Jon Bortz said in a statement Monday. "We continue to believe our proposal is superior to the Blackstone agreement and we look forward to engaging with LaSalle's board to quickly reach an agreement to merge our two companies and allow shareholders to maximize immediate and long-term value."

LaSalle said Monday that a special meeting for shareholders to vote on the Blackstone deal remains scheduled for Sept 6 in Washington.

BLOOMBERG