Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. LaSalle Hotel Properties (1053532) 10-Q published on Nov 01, 2018 at 4:27 pm
Reporting Period: Sep 29, 2018
held by the Company or held by Pebblebrook, Pebblebrook OP, Merger Sub, Merger OP or any of their respective subsidiaries, that is issued and outstanding immediately prior to the Company Merger Effective Time (including common shares of the Company relating to compensatory awards of the Company that become or are deemed to be issued or outstanding) will be converted into the right to receive, at the election of the holder, either: (i) 0.92 (the “Exchange Ratio”) validly issued, fully paid and nonassessable common shares of beneficial interest, par value $0.01 per share, of Pebblebrook (the “Common Share Consideration”); or (ii) $37.80 in cash, subject to certain adjustments and to any applicable withholding tax (the “Cash Consideration” and, together with the Common Share Consideration, the “Merger Consideration”). The maximum number of common shares of the Company eligible to be converted into the right to receive the Cash Consideration will be equal to 30% of the aggregate number of common shares of the Company issued and outstanding as of immediately prior to the Company Merger Effective Time (including common shares of the Company relating to compensatory awards of the Company that become or are deemed to be issued or outstanding), subject to pro-rata reductions if such maximum is exceeded. Any common shares of the Company held by Pebblebrook or its affiliates immediately prior to the Company Merger Effective Time will be cancelled for no consideration in the Company Merger and excluded from the right to receive the Cash Consideration.
Pursuant to the terms and conditions in the Merger Agreement, at the Company Merger Effective Time, (i) each outstanding 6.375% Series I Cumulative Redeemable Preferred Share of Beneficial Interest, par value $0.01 per share, of the Company (the “Series I Preferred Shares”) will be converted into the right to receive one share of a newly designated class of preferred shares of Pebblebrook, the 6.375% Series E Cumulative Redeemable Preferred Shares of Beneficial Interest, par value $0.01 per share, of Pebblebrook (the “Pebblebrook Series E Preferred Shares”) having the rights, preferences, privileges and voting powers materially unchanged from those of the Series I Preferred Shares immediately prior to the Company Merger, and (ii) each outstanding 6.3% Series J Cumulative Redeemable Preferred Share of Beneficial Interest, par value $0.01 per share, of the Company (the “Series J Preferred Shares” and, together with the Series I Preferred Shares, the “Preferred Shares”) will be converted into the right to receive one share of a newly designated class of preferred shares of Pebblebrook, the 6.3% Series F Cumulative Redeemable Preferred Shares of Beneficial Interest, par value $0.01 per share, of Pebblebrook (the “Pebblebrook Series F Preferred Shares”) having the rights, preferences, privileges and voting powers materially unchanged from those of the Series J Preferred Shares immediately prior to the Company Merger.
The execution by the Company of the Merger Agreement followed a determination by the Company’s Board of Trustees that the proposal from Pebblebrook reflected in the Merger Agreement constituted a Superior Proposal, as defined in the previously announced Agreement and Plan of Merger, dated as of May 20, 2018 (the “Blackstone Merger Agreement”), by and among BRE Landmark Parent L.P., BRE Landmark L.P., BRE Landmark Acquisition L.P., the Company and the Operating Partnership, and the termination by the Company, on September 6, 2018, of the Blackstone Merger Agreement in accordance with its terms. On September 5, 2018, the Company notified Blackstone that the Company’s Board of Trustees had concluded that the Pebblebrook proposal constituted a Superior Proposal and that, subject to Blackstone’s right to negotiate with the Company during the four business day period after Blackstone’s receipt of such notice, the Company’s Board of Trustees intended to terminate the Blackstone Merger Agreement and enter into a definitive agreement with Pebblebrook. On September 5, 2018, Blackstone delivered a notice to the Company waiving its rights to renegotiate its agreement with the Company subject to the Company’s compliance with the Blackstone Merger Agreement.
On June 29, 2018, a purported class action complaint, Erie County Employees Retirement System v. LaSalle Hotel Properties, et al., No. 24-C-18-003922, was filed in the Circuit Court for Baltimore City, Maryland by purported Company shareholder Erie County Employees Retirement System in connection with the proposed merger with Blackstone. An amended complaint was filed on July 11, 2018. The amended complaint names as defendants the Company and the members of the Company’s Board of Trustees. The amended complaint alleges, among other things, that the Board of Trustees breached its duties in agreeing to the Blackstone Merger Agreement, in not agreeing to a transaction with Pebblebrook, and in failing to disclose certain supposedly material information to shareholders in the preliminary proxy statement filed in connection with the Blackstone Merger Agreement. The amended complaint sought declaratory and injunctive relief, including a preliminary injunction barring the shareholder vote on the Blackstone Merger Agreement, as well as damages and attorneys’ fees and costs. On August 21, 2018, the plaintiff filed a motion for a preliminary injunction barring the shareholder vote on the Blackstone Merger Agreement. On September 6, 2018, the plaintiff withdrew that motion. The plaintiff’s counsel have advised the Company’s counsel that they believe the Company’s agreement to enter into a transaction with Pebblebrook rendered the case moot and entitled them to an award of attorneys’ fees. On October 10, 2018, the plaintiff’s counsel dismissed the complaint but advised the Court of their intent to seek an award of attorneys’ fees. The Company does not believe that the case played any role in the decision by its Board of Trustees to enter into a transaction with Pebblebrook and intends to oppose any request for an award of attorneys’ fees. The Company is unable to predict the developments in, outcome of, and/or economic or other consequences of this litigation or predict the developments in, outcome of, and/or other consequences arising out of any potential future litigation or government inquiries related to the Merger Agreement.
If the market price of Pebblebrook common shares increases between the date the Merger Agreement was signed, the date of the joint proxy statement/prospectus or the date of the Company’s special meeting and the completion of the Mergers, the Company’s shareholders could receive Pebblebrook common shares that have a market value upon completion of the Mergers that is greater than the market value of such shares calculated pursuant to the Exchange Ratio on the date the Merger Agreement was signed, the date of the joint proxy statement/prospectus or the date of the special meeting, respectively. Additionally, if the market price of Pebblebrook common shares declines between the date the Merger Agreement was signed, the date of the joint proxy statement/prospectus or the date of the Company’s special meeting and the completion of the Mergers, the Company’s shareholders could receive Pebblebrook common shares that have a market value upon completion of the Mergers that is less than the market value of such shares calculated pursuant to the Exchange Ratio on the date the Merger Agreement was signed, the date of the joint proxy statement/prospectus or the date of the special meeting, respectively.
Therefore, while the number of Pebblebrook common shares to be issued per common share of the Company is fixed, the Company’s shareholders cannot be sure of the market value of the Merger Consideration they will receive upon completion of the Mergers.