Full-service hotel REIT Ashford Hospitality Trust is getting hostile in its attempt to take over FelCor Lodging Trust. After trying to make a deal with the company's leaders since October, Ashford is taking its offer, which amounts to some $1.27 billion, directly to the shareholders.
Ashford has submitted a non-binding proposal to acquire FelCor Lodging Trust for a total consideration of $9.27 per share, based on closing prices as of February 17, 2017. Observers valued the deal at $1.27 billion.
The combined company would be the second-largest pure-play publicly traded lodging REIT by room count and the third-largest by enterprise value.
FelCor shareholders would receive a fixed exchange ratio of 1.192 shares of Ashford Trust, a total of 400,000 shares of Ashford Inc., and a total of 100,000 warrants to purchase Ashford Inc. shares.
This offer, based on Ashford Trust's written non-binding proposal to FelCor's Board of Directors on February 21, 2017, represents a substantial premium of 28% over FelCor's current stock price of $7.23 on February 17, 2017, a 23% premium to the 10-trading day volume weighted average price, and an 11% premium to FelCor's 52-week high closing stock price of $8.34 on December 14, 2016.
Ashford Trust said it believes that the proposed combination has compelling strategic, operational, and financial merit, presenting the shareholders of FelCor and Ashford Trust with a significant value creation opportunity.
Ashford Trust said it has attempted to conduct good faith discussions with FelCor since early October 2016.
"However, even with a fully-executed non-disclosure agreement in place, FelCor has failed to meaningfully engage and has refused to provide customary information, including historical property level financial information, hotel management contracts, franchise/license agreements, consolidated financial projections, and other documents on Ashford Trust's customary due diligence request list, which information would allow Ashford Trust to fully evaluate this significant opportunity to unlock value for shareholders of both companies.
As a result, Ashford Trust, in consultation with its financial and legal advisors, has now decided to make the proposal public in order to inform FelCor's shareholders of its intent, says Benjamin J. Ansell, Lead Director of Ashford Trust.
"The benefits of this proposal are compelling. We believe the combination would provide significant strategic and financial benefits to both sets of shareholders and create a clear path towards considerable long-term value creation far in excess of FelCor's standalone prospects," Ansell said.
"Ashford Trust has a proven, long-term track record of delivering substantial returns to shareholders through a wide variety of strategic initiatives, including transformative transactions, and we believe shareholders will view our proposal favorably.
While it remains our strong desire to reach an agreement with FelCor on a friendly basis, we are fully committed to pursuing this transaction and are prepared to take all necessary steps to complete it, including nominating a slate of independent directors to ensure that FelCor appropriately considers our proposal," Ansell said.
FelCor's board of directors said it would review the bid."The Board established a transaction committee in December of 2016, comprised of independent directors, to facilitate consideration of AHT’s proposal and direct any related discussions, among other things," the company said in a press release. "To date, however, the parties have not been able to reach mutually agreeable terms."