- 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 -
BETHESDA, Md.--(BUSINESS WIRE)--Apr. 24, 2017--
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.
View source version on businesswire.com: http://www.businesswire.com/news/home/20170424005647/en/
Source: RLJ Lodging Trust
RLJ Contacts:
Investors:
RLJ
Lodging Trust
Leslie D. Hale, 301-280-7774
Chief Operating
Officer and Chief Financial Officer
or
Media:
ICR, LLC
Phil
Denning, 646-277-1258
Phil.Denning@icrinc.com
or
FelCor
Contacts:
Investors:
FelCor Lodging Trust
Michael
C. Hughes, 972-444-4967
Chief Financial Officer,
or
Media:
ICR,
LLC
Jason Chudoba, 646-277-1249
Jason.chuduba@icrinc.com
