Ashford announced that independent hotel management company Remington Hotels, a wholly owned portfolio company of the alternative asset management firm, has acquired privately held third-party hotel management company Chesapeake Hospitality.
Ashford is acquiring Chesapeake for an initial consideration of $15.75 million, payable with $6.3 million in cash and $9.45 million of a new Series CHP Convertible Preferred Unit, which will pay a 7.28 percent annual dividend and have a $117.50 conversion price per share. Chesapeake will also have the ability to earn up to $10.25 million of additional consideration based on its base management fee contribution for the trailing 12-month periods ending March 2024 and March 2025 for a total potential consideration of $26 million. Should Chesapeake's performance result in the full earnout for the seller, Ashford expects $5.3 million of earnings before interest, taxes, depreciation and amortization contribution for the full year of 2024, which would represent an acquisition multiple of 4.9x EBITDA.
Expanded Portfolio
The transaction is expected to increase the scale and scope of Remington's hotel management business while expanding its geographic footprint to complementary Midwestern markets, including Pittsburgh, Milwaukee, Detroit and St. Louis. The acquisition also adds several IHG Hotels & Resorts to its portfolio, as well as the 877-room Showboat Atlantic City (N.J.), which will be the largest hotel in Remington's portfolio.
The combined company will operate under the Remington brand and will be focused on leveraging its enhanced scale to pursue profitable growth opportunities, including the continued expansion of hotel management business to third parties. This transaction also diversifies Remington's client base away from the company's advised real estate investment trusts. As a result of the acquisition, Remington's mix of third-party hotels will increase from approximately 20 percent to approximately 40 percent.
"Though the hospitality space has faced massive challenges over the past few years, Remington has remained steadfast in its commitment to being the best hotel manager in the industry," said Remington President and CEO Sloan Dean. "By melding Chesapeake's culture and know-how with ours, we believe we are well-positioned to cultivate even stronger relationships with our properties' owners by providing them with more resources, better economies of scale, and a more satisfying guest experience."
"I'm so proud that Chesapeake is joining Remington, a company that is known for its stellar results and has made a real cultural shift in the hotel management space," said Chris Green, former president and CEO of Chesapeake and newly appointed divisional president of Remington Hotels. "This partnership will be a practice in blending two companies that have operated in different geographical lanes and have a steadfast commitment to doing what is best for their clients and employees. I'm looking forward to taking the service our clients know and love to the next level as we access the resources Remington has to offer."
"This is a powerful combination of two highly complementary and synergistic businesses, and we are confident this transaction will come as a value-added partnership to our combined third-party client base," commented Monty J. Bennett, Ashford's chairman and CEO. "This is a terrific acquisition for Remington, and underscores Ashford's commitment to supporting our portfolio companies as they execute on organic and inorganic growth initiatives to create shareholder value."
With the completion of this acquisition, Remington now manages 121 hotels in 28 states across 25 brands, including 19 independent and boutique properties. The combined company will be headquartered in Dallas, where Remington's management will oversee day-to-day operations of its entire national portfolio of properties.
Upon integration, all former Chesapeake managed hotels will remain under the same teams.