RLJ Shareholders Approve Merger with FelCor

BETHESDA, MD—Shareholders of RLJ Lodging Trust voted to approve a merger with FelCor Lodging Trust Incorporated, with plans to close the deal on or about August 31, subject to the satisfaction or waiver of all closing conditions related to the transactions.

The two companies entered into a definitive merger agreement in April. 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.

“Today’s vote solidifies our position as the premier lodging REIT within the most profitable segment of the hotel market,” said Robert L. Johnson, executive chairman of RLJ. “We are very pleased with the overwhelming level of support that we received from both RLJ and FelCor shareholders. We look forward to closing this transaction at the end of the month and starting to unlock the strategic benefits of the merger.”

RLJ shareholders approved the issuance of common shares of beneficial interest, par value $0.01 per share, of RLJ in connection with the merger and stockholders of FelCor approved FelCor’s merger with and into a subsidiary of RLJ in a stock-for-stock transaction in connection with the previously announced agreement and plan of merger, dated as of April 23, by RLJ, FelCor and the other entities.

At the special meeting of RLJ shareholders, approximately 78% of the votes cast were voted in favor of the proposal related to the issuance of RLJ common shares in connection with the merger. At the special meeting of FelCor stockholders, approximately 81% of the outstanding shares of FelCor common stock were voted, with approximately 99% of the votes cast in favor of the merger.

Assuming completion of the merger, FelCor stock is expected to be delisted from trading on the New York Stock Exchange after the close of trading on August 31. As a result of the merger, each share of FelCor common stock will be converted into 0.362 RLJ common shares. RLJ common shares will continue to trade under the existing ticker symbol RLJ on the NYSE.

According to an analyst at Canaccord Genuity Inc., the deal could lead to a short-term selloff in the stock, as short-term investors that were not eligible to vote will exit on the idea that an outright sale of RLJ is now unlikely.

“If the stock were to fall below $19 on this news, we would be buyers,” said Ryan Meliker, analyst, Canaccord Genuity Inc. “The FCH bonds that RLJ will be assuming have robust change-of-control provisions that require a make-whole payment in excess of $100 million at present on any cash transaction. That issue coupled with the choppiness of the FCH portfolio—a mix of good and bad assets, high quality and low quality, luxury and select-service—makes a deal for RLJ inclusive of FCH unlikely, especially at pricing above $24. We estimate the post-FCH merger NAV to drop $1 to $23.36.”

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