Park Hotels & Resorts acquires Chesapeake Lodging Trust for $2.7B

Park Hotels & Resorts' Hilton San Francisco Union Square will be one of 66 hotels owned by the combined company after closing. Photo credit: Hilton

Park Hotels & Resorts will acquire all Chesapeake Lodging Trust for $2.7 billion, putting the combined company’s estimated enterprise value at $12 billion. The transaction, which was approved by both companies’ boards, is expected to close in late third quarter or early fourth quarter of 2019.

Under the terms of the merger agreement, Park will acquire all Chesapeake’s outstanding shares in a cash and stock transaction. Chesapeake shareholders will receive $11 in cash and 0.628 of a share of Park common stock for each Chesapeake stock they own. Upon closing, Park stockholders and Chesapeake shareholders will own approximately 84 percent and 16 percent of the combined company, respectively. The transaction is subject to customary closing conditions, including approval by Chesapeake shareholders. 

Five noncore hotels are expected to be sold prior to closing: Chesapeake’s 122-room Hyatt Herald Square New York and 185-room Hyatt Place New York and three non-core Park hotels currently under contract. Accounting for these sales, the combined company will consist of 66 hotels across 17 states and Washington, D.C.


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Park has secured a $1.1 billion financing commitment from BofA Merrill Lynch to finance the cash component of the merger consideration, repay Chesapeake’s unsecured term loan and two mortgages and pay for a portion of the transaction costs.

“Chesapeake’s high-quality portfolio of hotels will accelerate our strategic goals of upgrading the quality of our portfolio and achieving brand, operator and geographic diversity,” Thomas J. Baltimore Jr., Park’s chairman/CEO, said in a statement. “We are expecting to have the same record of success and growth from the Chesapeake assets that we have enjoyed from the Hilton assets we took over in January 2017—and we will be laser focused every day to create long-term value.”

Overall, Park said it has identified around $24 million of potential earnings before interest, taxes, depreciation and amortization upside in 2020 and $34 million in 2021 across Chesapeake’s portfolio. This includes about $17 million of general and administrative expenses annually. When accounting for the five hotels the company anticipates selling prior to closing, pro-forma net debt to adjusted EBITDA will be 4.4.

Park’s board of directors will increase to 10 members upon closing, with two additions coming from Chesapeake’s board of trustees. Baltimore will continue to serve as chairman and lead the combined company.