- Creates Third Largest Pure-Play Lodging REIT
-
- Attractive Strategic Combination with
Complementary Portfolios and Value Creating Opportunities -
- Broad Diversification and Strong Presence in
Key Markets -
- Investor Conference Call and Webcast at 8:00
am ET -
RLJ Lodging Trust (“RLJ”) (NYSE:RLJ) and FelCor Lodging Trust
Incorporated (“FelCor”) (NYSE:FCH) today announced that they have
entered into a definitive merger agreement (the “Merger Agreement”)
under which FelCor will merge with and into a wholly-owned
subsidiary of RLJ in an all-stock transaction. Post-merger, RLJ is
expected to have a pro forma equity market capitalization of
approximately $4.2 billion and a total enterprise value
of $7 billion, creating the largest pure-play public REIT
dedicated to owning focused-service and compact full-service
hotels.
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The merger will establish the third biggest pure-play lodging
REIT by enterprise value, creating meaningful scale to capitalize
on cost efficiencies, negotiate leverage and access to capital, and
the opportunity to strategically recycle assets and optimize the
portfolio. The combined company will have ownership interests in
160 hotels, including premium-branded hotels located primarily in
urban and coastal markets with multiple demand generators. The
combination also provides significant penetration within key
high-growth markets and broad geographic and brand diversity. With
a strong and flexible balance sheet and disciplined approach to
portfolio and asset management, the combined company will have the
attributes and capabilities to drive accretive growth and to pursue
additional opportunities to enhance value.
Robert L. Johnson, Executive Chairman of RLJ Lodging Trust,
stated, “As Chairman of RLJ Lodging Trust, I would like to say that
we are very excited about this combination with FelCor. I am
confident that, under the management of our seasoned team of
executives, this portfolio will yield significant benefits to the
shareholders of both companies.”
“We are truly excited about this unique opportunity as we
transform our two companies into one of the largest pure-play
lodging REITs. Combining these two complementary portfolios creates
a best-in-class platform that is well positioned to deliver
long-term growth and generate significant shareholder value,”
commented Ross H. Bierkan, RLJ’s President and Chief Executive
Officer. “In addition to being immediately accretive to our RevPAR,
merging with FelCor expands our geographic footprint in
highly-desirable markets on the West Coast, while strengthening our
presence in other coastal markets in the East and the South. RLJ’s
enhanced scale post-merger is expected to generate both corporate-
and property-level operating cost benefits and market leverage
opportunities, which will drive shareholder value over time.”
Steven R. Goldman, FelCor’s Chief Executive Officer, stated, “We
are very pleased to combine with RLJ Lodging Trust to create a
leading lodging REIT that is positioned for significant long-term
growth. This merger creates a company that has greater reach in key
markets with a streamlined operating structure and more
advantageous cost of capital. FelCor shareholders are receiving an
attractive valuation for the company’s hotel assets and have the
opportunity to benefit from a highly respected management team with
a history of value creation.”
Transaction Terms
Under the terms of the Merger Agreement, each share of FelCor
common stock will be converted into 0.362 shares of newly issued
common shares of RLJ common stock in a taxable merger. FelCor’s
operating units will be exchanged for limited partnership units in
RLJ’s operating partnership at a similar exchange ratio of 0.362.
Following the merger, RLJ’s shareholders are expected to own
approximately 71 percent of the combined company’s fully diluted
equity, and FelCor’s shareholders are expected to own the remaining
29 percent.
This strategic merger was unanimously approved by the Boards of
both companies. Once the merger is consummated, the company will
retain the RLJ Lodging Trust name and will trade under the ticker
symbol “RLJ” (NYSE).
Summary of Strategic
Benefits
Merging RLJ and FelCor positions the combined company to enhance
shareholder value as an industry leader among lodging REITs, with
the following highlights:
- Combination creates the third
largest pure-play lodging REIT with a combined enterprise value of
$7 billion
- Increased shareholder liquidity and
cost of capital efficiencies
- Stock transaction allows both sets of
shareholders to participate in the upside
- Enhanced positioning with brands and
operators
- Leading upscale portfolio of compact
full-service and premium focused-service hotels generating strong
operating margins
- Combined portfolio will include 160
hotels in 26 states and the District of Columbia, diversified
across Marriott, Hilton, Hyatt and Wyndham flags
- Broad geographic diversity and
strengthened presence in key markets such as California, Florida
and Boston
- Positive financial impact and
positioning for future value creation
- Accretive in first full year
- Expected cash G&A expense savings
of approximately $12 million and approximately $10 million of
potential savings from stock-based compensation expense and
capitalized cash G&A
- Opportunity for additional ongoing
operating and cash flow improvements through greater purchasing
power, market leverage and capital expenditure efficiencies
- Future opportunities to unlock value
from portfolio repositioning
- Potential conversion and redevelopment
opportunities
- Opportunity to actively refine
portfolio
- Strong and flexible balance
sheet
- Significant liquidity, minimal
near-term maturities and opportunity to lower cost of capital
Pro Forma Operations and Balance
Sheet
The combined entity will have 31,467 rooms across 160 hotels.
The merger will be immediately accretive to RLJ’s RevPAR with Pro
forma 2016 RevPAR increasing 5.4% to $137.
The merger of RLJ and FelCor will produce significant economies
of scale, including approximately $22 million of expected savings
from the elimination of duplicative corporate general and
administrative costs. The combined company is also expected to
benefit from long-term, property level savings in the areas of
energy/utility contracts, insurance and furniture, fixture and
equipment (FF&E) procurement. Finally, the merger will augment
RLJ’s human capital by adding a number of talented FelCor
professionals to the RLJ team.
The combined entity will have significant financial strength and
flexibility, including approximately $700 million of available
liquidity, which includes approximately $400 million of an undrawn
credit facility. The combined entity’s projected Pro forma Net Debt
to EBITDA ratio during the first full-year of operations is
expected to be less than 4.5x (or less than 5.0x including
convertible perpetual preferred equity) and is expected to improve
each year thereafter.
Leadership and
Organization
The combined company will continue to be led by Robert L.
Johnson as Executive Chairman, Ross H. Bierkan as President and
Chief Executive Officer, and Leslie D. Hale as Chief Operating
Officer and Chief Financial Officer. Upon completion, the company’s
headquarters will remain in Bethesda, Maryland. The number of
Trustees on RLJ’s Board will be increased to eight, with one
existing FelCor director mutually acceptable to FelCor and RLJ
being appointed to the RLJ Board upon closing.
Dividend Policy and
Declaration
Both RLJ and FelCor are expected to continue to follow their
respective dividend policies until the closing of the merger.
Following the closing of the transaction, the new company expects
to pay a quarterly dividend of $0.33 per common share of beneficial
interest, consistent with RLJ’s current dividend policy. Any
post-merger dividends are subject to the approval of RLJ’s
Board.
Closing of the
Transaction
A joint proxy statement/prospectus will be filed with the
Securities and Exchange Commission and, following its
effectiveness, will be mailed to the shareholders of both
companies. The transaction is expected to close by the end of 2017.
The merger is subject to customary closing conditions, including
the approval of both RLJ and FelCor shareholders.
Advisors
Barclays is acting as the financial advisor to RLJ and Hogan
Lovells and Arent Fox are serving as legal advisors. BofA Merrill
Lynch is acting as the financial advisor to FelCor, and Sidley
Austin, Polsinelli and Jones Day provided legal advice to FelCor.
ICR, LLC and Financial Profiles, Inc. are serving as communications
advisors for the transaction.
Conference Call and
Webcast
The companies will host a joint conference call on Monday, April
24, 2017 at 8:00 am (Eastern Time) to discuss the proposed merger.
Participants will include Ross H. Bierkan, President and Chief
Executive Officer of RLJ, Steven R. Goldman, Chief Executive
Officer of FelCor, Leslie D. Hale, Chief Operating Officer and
Chief Financial Officer of RLJ, and Michael C. Hughes, Chief
Financial Officer of FelCor. The conference call can be accessed by
dialing (877) 407-3982 or (201) 493-6780 for international
participants and ask for the RLJ Special Conference Call. A replay
of the call will be available from 11:00 am (Eastern Time) on April
24, 2017, until midnight (Eastern Time) on May 8, 2017. The replay
can be accessed by dialing (844) 512-2921 or (412) 317-6671 for
international callers, and entering pin number 13660980.
A live webcast of the conference call will also be available
online at RLJ’s website, www.rljlodgingtrust.com, and at FelCor’s
website, www.felcor.com. A replay of the webcast will be archived
and will be available, along with an investor presentation
regarding the transaction, in the Investor Relations sections of
each company's website.
About RLJ Lodging Trust
RLJ Lodging Trust is a self-advised, publicly traded real estate
investment trust focused on acquiring premium-branded,
focused-service and compact full-service hotels. The Company owns
122 hotels with approximately 20,100 rooms, located in 21 states
and the District of Columbia.
About FelCor Lodging
Trust
FelCor Lodging Trust, a real estate investment trust, owns a
diversified portfolio of primarily upper-upscale full-service
hotels that are located in major urban and resort markets
throughout the U.S. FelCor partners with leading hotel companies
who operate its properties under globally renowned names and as
premier independent hotels.
Forward Looking
Statements
Certain statements in this press release that are not in the
present or past tense or that discuss the expectations of RLJ
Lodging Trust (“RLJ”) and/or FelCor Lodging Trust Incorporated
(“FelCor”) are forward-looking statements within the meaning of
Section 27A of the U.S. Securities Act of 1933, as amended, and
Section 21E of the U.S. Securities Exchange Act of 1934, as
amended. These forward looking statements, which are based on
current expectations, estimates and projections about the industry
and markets in which RLJ and FelCor operate and beliefs of and
assumptions made by RLJ management and FelCor management, involve
uncertainties that could significantly affect the financial results
of RLJ or FelCor or the combined company. Words such as "expects,"
"anticipates," "intends," "plans," "believes," "seeks,"
"estimates," “forecast,” “guidance,” “outlook,” “may,” and “might”
and variations of such words and similar expressions are intended
to identify such forward looking statements, which generally are
not historical in nature. Such forward-looking statements may
include, but are not limited to, statements about the anticipated
benefits of the proposed merger between RLJ and FelCor, including
future financial and operating results, the attractiveness of the
value to be received by FelCor stockholders, the attractiveness of
the value to be received by RLJ, the combined company's plans,
objectives, expectations and intentions, the timing of future
events, anticipated administrative and operating synergies, the
anticipated impact of the merger on net debt ratios, cost of
capital, future dividend payment rates, forecasts of FFO accretion,
projected capital improvements, expected sources of financing, and
descriptions relating to these expectations. All statements that
address operating performance, events or developments that we
expect or anticipate will occur in the future — including
statements relating to expected synergies, improved liquidity and
balance sheet strength — are forward looking statements. These
statements are not guarantees of future performance and involve
certain risks, uncertainties and assumptions that are difficult to
predict. Although we believe the expectations reflected in any
forward-looking statements are based on reasonable assumptions, we
can give no assurance that our expectations will be attained and
therefore, actual outcomes and results may differ materially from
what is expressed or forecasted in such forward looking statements.
Some of the factors that may affect outcomes and results include,
but are not limited to: (i) national, regional and local economic
climates, (ii) changes in the real estate industry, financial
markets and interest rates, or to the business or financial
condition of either company or business (iii) increased or
unanticipated competition for the companies' properties, (iv) risks
associated with acquisitions, including the integration of the
combined companies' businesses, (v) the potential liability for the
failure to meet regulatory requirements, including the maintenance
of REIT status, (vi) availability of financing and capital, (vii)
risks associated with achieving expected revenue synergies or cost
savings, (viii) risks associated with the companies' ability to
consummate the merger and the timing of the closing of the merger,
(ix) the outcome of claims and litigation involving or affecting
either company, (x) applicable regulatory changes, and (xi) those
additional risks and factors discussed in reports filed with the
Securities and Exchange Commission ("SEC") by RLJ and FelCor from
time to time, including those discussed under the heading "Risk
Factors" in their respective most recently filed reports on Forms
10K and 10Q. Neither RLJ nor FelCor undertakes any duty to update
any forward looking statements appearing in this document.
Additional Information about the Proposed Merger and Where to
Find It
This communication relates to the proposed transaction pursuant
to the terms of the Agreement and Plan of Merger, dated as of April
23, 2017, by and among RLJ Lodging Trust and FelCor Lodging Trust,
Inc. In connection with the proposed merger, RLJ expects to file
with the SEC a registration statement on Form S4 that will include
a joint proxy statement of RLJ and FelCor that also constitutes a
prospectus of RLJ, which joint proxy statement/prospectus will be
mailed or otherwise disseminated to RLJ shareholders and FelCor
stockholders when it becomes available. RLJ and FelCor also plan to
file other relevant documents with the SEC regarding the proposed
transaction. INVESTORS ARE URGED TO READ THE JOINT PROXY
STATEMENT/PROSPECTUS AND OTHER RELEVANT DOCUMENTS FILED WITH THE
SEC IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION. You may obtain a free copy of the joint
proxy statement/prospectus and other relevant documents (if and
when they become available) filed by RLJ and FelCor with the SEC at
the SEC's website at www.sec.gov. Copies of the documents filed by
RLJ with the SEC will be available free of charge on RLJ's website
at www.rljlodgingtrust.com or by emailing RLJ Investor Relations at
ir@rljlodgingtrust.com or at 301-280-7774. Copies of the documents
filed by FelCor with the SEC will be available free of charge on
FelCor's website at www.felcor.com or by contacting FelCor Investor
Relations at asalami@felcor.com or at 972-444-4967.
Certain Information Regarding Participants
RLJ and FelCor and their respective trustees, directors and
executive officers and other members of management and employees
may be deemed to be participants in the solicitation of proxies in
respect of the proposed merger. You can find information about
RLJ’s executive officers and Trustees in RLJ's definitive proxy
statement filed with the
SEC on March 28, 2017 in connection with its 2017 annual meeting
of shareholders and in Form 4s of RLJ's trustees and executive
officers filed with the SEC. You can find information about
FelCor's executive officers and directors in FelCor's preliminary
proxy statement filed with the SEC on March 24, 2017 in connection
with its 2017 annual meeting of stockholders. Additional
information regarding the interests of such potential participants
will be included in the joint proxy statement/prospectus and other
relevant documents filed with the SEC if and when they become
available. You may obtain free copies of these documents from RLJ
or FelCor using the sources indicated above.
No Offer or Solicitation
This document shall not constitute an offer to sell or the
solicitation of an offer to buy any securities, nor shall there be
any sale of securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such jurisdiction.
No offering of securities shall be made except by means of a
prospectus meeting the requirements of Section 10 of the U.S.
Securities Act of 1933, as amended.
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version on businesswire.com: http://www.businesswire.com/news/home/20170424005647/en/
RLJ Contacts:Investors:RLJ
Lodging TrustLeslie D. Hale, 301-280-7774Chief Operating Officer
and Chief Financial OfficerorMedia:ICR, LLCPhil Denning,
646-277-1258Phil.Denning@icrinc.comorFelCor Contacts:Investors:FelCor Lodging
TrustMichael C. Hughes, 972-444-4967Chief Financial
Officer,orMedia:ICR, LLCJason Chudoba,
646-277-1249Jason.chuduba@icrinc.com
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