Sonesta to acquire RLH Corp.

As of June 30, RLH Corp.’s portfolio comprised 61,299 guestrooms open at 980 properties. Photo credit: RLH Corp. (RLH Dual Brand)

Sonesta International Hotels Corp. is acquiring hotel franchise company RLH Corp. in an all-cash transaction valued at approximately $90 million. The agreement has been unanimously approved by the RLH board of directors.

Under the terms of the agreement, holders of RLH’s common stock will receive $3.50 per share in cash. This represents an 88 percent premium over the Nov. 4, 2020, closing share price, the last trading date before Red Lion most recently provided an update on its strategic alternatives, and a 30 percent premium over the Dec. 30 closing price prior to the transaction being announced.

As of June 30, RLH’s portfolio comprised 61,299 guestrooms open at 980 properties. Sonesta reported 13,321 guestrooms and 80 properties as of the same time period but has since grown its portfolio a reported 350 percent through several agreement terminations in recent months, and the company now has close to 300 Sonesta properties across seven brands operating in the U.S., Canada, Chile, Colombia, Ecuador, Egypt, Peru and St. Maarten.

“The RHL acquisition brings a platform of well-established brands and franchisees to the Sonesta family,” said Carlos Flores, president & CEO of Sonesta International Hotels Corp. “The resulting new domestic franchising program will further accelerate Sonesta’s rapid growth and increase its footprint across the country. As a result, Sonesta will fast-track its elevated standing as a pre-eminent hotel owner, operator, and now, domestic franchisor—and greater amplify opportunities for growth and advancement for Sonesta associates across the country and around the world.” 

“We are excited about unlocking shareholder value through this all-cash transaction with Sonesta,” said R. Carter Pate, chairman of RLH. “After conducting a thorough review of strategic alternatives, the board believes [the] announcement is in the best interest of all of Red Lion’s shareholders.”

The transaction, which is currently expected to close in the first half of 2021, is subject to customary closing conditions, including the approval of RLH’s shareholders, who will vote on the transaction at a special meeting on a date to be announced. The transaction is not contingent on receipt of financing by Sonesta. Upon completion of the transaction, RLH will become a privately held company and its common stock will no longer be listed on the NYSE.

Making Moves

Sonesta has been busy of late, including launching two new brands. The new upscale focused-service brand Sonesta Select was introduced mid-December with nine properties, shortly after the introduction of Sonesta Simply Suites, a new extended-stay hotel concept with 61 initial locations. The new brands join Sonesta's three other brands in the U.S.: Royal Sonesta, Sonesta Hotels & Resorts and Sonesta ES Suites.

The company also transitioned branding and management for 102 hotels to subsidiaries of Sonesta from InterContinental Hotels Group as well as another 122 properties from Marriott International. All the hotels are owned by Service Properties Trust, which owns a 34 percent stake in Sonesta.

RLH reported a “challenging” 2019 in which it saw the company post a net loss of $19 million, compared to a net income of $1.3 million in 2018. The number of terminated franchise agreements during the year also outnumbered the number of signings. Former president and CEO Greg Mount resigned from the company in November.

In 2020, the company hired a new CEO (John Russell, who had taken over as interim leader in December of 2019) and relaunched the GuestHouse International brand as GuestHouse Extended Stay, an upper-economy brand suited for conversions. The company also promised to take a hard look at brand standards and fees to appease what Russell called “unhappy” franchisees. The company also reported improvement in the number of franchise signings.