Hotel ownership company Hersha Hospitality Trust and KSL Capital Partners, an investor in travel and leisure businesses, have formed a definitive merger agreement under which affiliates of KSL will acquire all of the outstanding common shares of Hersha for $10.00 per share in an all-cash transaction valued at approximately $1.4 billion. The purchase price represents a premium of approximately 60 percent over Hersha’s closing share price on Aug. 25, the last full trading day prior to announcing the deal.
“This transaction provides our shareholders with immediate and certain value at a substantial premium to our public valuation,” Jay Shah, Hersha’s executive chairman, said in a statement. “Following a multiyear comprehensive review by the independent Transaction Committee of Hersha’s Board of Trustees, the Board and management team are confident this step will allow us to deliver value for our shareholders while refocusing on growing the business over a longer period of time.”
“We are proud of the work our team has done to build on Hersha’s culture and capabilities and make the company what it is today,” Hersha CEO Neil Shah added. “This transaction is a result of our deliberate actions to focus on key gateway markets and lifestyle and leisure properties, as well as our work to create a concentrated portfolio consisting of some of the highest quality hotels in their respective markets.”
“Hersha and its team have built an impressive, curated portfolio of experiential luxury and lifestyle hotels and resorts in strategic markets,” said Marty Newburger, partner at KSL. “With KSL’s extensive track record investing in high-quality assets in dynamic metropolitan markets across North America and around the world, we are uniquely suited to position the business for further success over the long term.”
Transaction Details
The transaction is expected to close in the fourth quarter of 2023, subject to customary closing conditions, including approval by the holders of a majority of Hersha’s outstanding common shares as set forth in the merger agreement. Certain members of Hersha’s executive management team and certain of their affiliated trusts have signed separate voting agreements under which they agreed to vote certain Hersha shares controlled by each of them in support of the proposed transaction. Subject to and upon completion of the transaction, Hersha’s common shares and preferred shares will no longer be listed on any public securities exchange.
Under the terms of the merger agreement, which has been unanimously recommended by the independent Transaction Committee of Hersha’s Board of Trustees and unanimously approved by Hersha’s full Board of Trustees, Hersha shareholders will receive $10 in cash for each common share they own, and holders of Hersha’s 6.87 percent Series C Cumulative Redeemable Preferred Shares, 6.50 percent Series D Cumulative Redeemable Preferred Shares and 6.5 percent Series E Cumulative Redeemable Preferred Shares will receive $25 in cash, plus any accrued and unpaid dividends to which they are entitled, for each preferred share they own.
Advisors
Goldman Sachs & Co. is serving as exclusive financial advisor and Latham and Watkins and Venable are serving as legal advisors to the Transaction Committee of Hersha’s Board of Trustees. Hunton Andrews Kurth is serving as legal advisor to Hersha. Wells Fargo and Citigroup are serving as financial advisors and Simpson Thacher & Bartlett and Miles and Stockbridge are serving as legal advisors to KSL. Additionally, Wells Fargo and Citigroup provided a debt financing commitment to KSL in connection with the transaction.