DALLAS, Texas—The board of directors of Braemar Hotels & Resorts Inc. announced that it is initiating a process for the sale of the company.
The board of directors formed a special committee comprised solely of independent and disinterested directors to explore a range of strategic alternatives, aimed at maximizing both near- and long-term shareholder value. After reviewing various strategic options to maximize value for shareholders, the board has determined that it is in the best interests of the company and its shareholders to pursue a sale of the company. Braemar Hotels & Resorts Inc., together with its financial advisor, Robert W. Baird & Co. Inc., is initiating the sale process immediately, including soliciting interest from potential buyers and coordinating customary information sharing.
Richard Stockton, chief executive officer of Braemar Hotels & Resorts, said, “We’ve built a high-quality portfolio that is well-positioned to attract significant interest from private market buyers. With improving economic conditions, continued strength in industry performance, limited new room supply, and healthy consumer spending, I believe we are entering a favorable environment for a potential sale.”
In conjunction with this process, Braemar and its external advisor, Ashford Inc. have executed a letter agreement with respect to the Fifth Amended and Restated Advisory Agreement, dated as of April 13, 2018, pursuant to which the parties agree that, while a fair and reasonable calculation of all amounts due from the company to Ashford would be significantly higher, Ashford has agreed to accept $480 million in the context of a transaction that results in a change of control of the company that terminates the advisory agreement.
Ashford received $17 million of the agreed company sale fee upon the execution of the letter agreement, which amount will be credited against the company sale fee in the event the company is sold before July 1, 2028. If the company does not complete a change of control transaction by that time, the advance payment will be credited by Ashford against any amounts becoming due and payable by the company to Ashford under the advisory agreement. In addition, any buyer of the company will be required to assume the master project management agreement between the company and Premier Project Management, LLC, and the master hotel management agreement between the company and Remington Lodging & Hospitality, LLC. However, the special committee of the board and the independent directors have negotiated that such documents may be completely canceled by the buyer for an additional payment of $25 million to be paid to Ashford at the time of closing of any sale of the company.
Rebeca Odino-Johnson, chairperson of the special committee, said, “We explored multiple alternatives for Braemar, including a potential internalization of management. However, given the sustained disconnect between our share price and our iconic portfolio’s intrinsic real estate value, the Board believes pursuing a sale process is the right step at this time. The Board also believes that this is the best opportunity for shareholders to realize a premium to the existing share price.”
She continued, “The termination fee payable to Ashford upon a sale of the Company has increased considerably over the last few years as a result of the growth of the portfolio and the additional services Ashford provides to the Company and its hotels. She concluded, “As this process moves forward, we will remain focused on executing our business plan and generating optimal returns from our assets to deliver maximum value to shareholders in the context of the anticipated transaction.”
Monty J. Bennett, chairman of the board of Braemar Hotels & Resorts, said, “When we created Braemar back in 2013, our hope was that Braemar’s high-quality portfolio and strong property performance would result in an attractive valuation, giving the Company an attractive cost of capital for growth. While Braemar has traded at a similar multiple to its publicly-traded lodging REIT peers, the reality is that the public markets have not been friendly to lodging REITs, including Braemar. This fact, along with the constant shareholder activism that Braemar has experienced, has led us to conclude that a sale of the Company is the best way to maximize value for shareholders. Hotel portfolios like the Braemar portfolio do not come to the market very often, and we believe the opportunity to acquire this iconic portfolio will attract significant buyer interest from around the world and result in an attractive valuation for shareholders.”
There is no deadline or definitive timetable set for completion of the sale process, and there can be no assurance that this process will result in a sale of the company. Braemar does not expect to disclose or provide an update concerning developments related to this process unless and until the board of directors has approved a specific transaction or other course of action requiring disclosure, or the company determines that a disclosure is required by law or otherwise deemed appropriate.
Braemar has engaged Baird as its financial advisor and White & Case LLP as its legal advisor in conjunction with Braemar’s review of its strategic alternatives.
