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Asset management firm Blackstone Group LP has strike a deal to acquire real estate investment trust (REIT) LaSalle Hotel Properties for $3.7 billion, beating rival bid of $3.5 billion from another REIT Pebblebrook Hotel Trust.

The merger values LaSalle at $33.50 per share and accounts for a premium of 5 percent to the luxury hotel owner’s closing price on Friday.

Blackstone’s all-cash acquisition, which is worth about $4.8 billion including debt, grants the New York-based company a bigger piece of the hotel market, since LaSalle have 41 hotels in 11 US markets, which are run by other hotel companies.

The private equity firm usually reorganizes and sells for a profit the hotels and other real estate holdings that it bought at a lower price.

LaSalle Chairman Stuart Scott said they believed that the agreement is in the best interests of their shareholders and represents the culmination of a careful assessment of strategic alternatives.

Scott stated that it was in touch with 20 potential buyers and signed confidentiality contracts with 10 of them before accepting Blackstone’s offer.

The deal is expected to close in the third quarter, though it still has to get the approval of LaSalle’s shareholders.   

Blackstone’s Bid Tops Pebblebrook’s

With LaSalle agreeing to be acquired by Blackstone, Pebblebrook’s attempt to buy the US hotel owner might have reached its end.

Describing the transaction as the most compelling opportunity, LaSalle chose Blackstone’s $3.7 billion acquisition offer over Pebblebrook’s $3.5 billion bid, which could have value LaSalle at $35.89 per share based on its Friday’s close.

Compared to Blackstone’s all-cash deal, the Maryland-based company’s proposal involved a maximum of 20 percent in cash and the rest in stock.            

Pebblebrook has been going after LaSalle for the past two months. It has previously asked LaSalle to not enter into an agreement with a termination fee without fully reviewing its offer.   

If the deal collapses due to certain reasons, LaSalle and Blackstone could face significant fees. LaSalle may have to pay Blackstone $112 million if it terminates the agreement, or Blackstone might end up paying $336 million to LaSalle if it pulls out from the transaction.

Blackstone Exits Hilton Worldwide

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While Blackstone is entering into a new hotel deal, it is also profitably leaving another, as the firm announces on Friday the sale of the last of its shares of hotel and resort owner Hilton Worldwide Holdings Inc.   

Blackstone’s decision to sell the last of its Hilton shares, which is worth about $1.3 billion, is regarded as the most successful private equity deal in the real estate market.    

The company’s departure ends 11 years of profitable investment in the McLean-based hotel chain operator. Blackstone is to realize a profit of $14 billion with its recent exit, which means that it has more than tripled its initial investment.

Hilton also intends to purchase $1.25 million shares from Blackstone, as part of the deal.   

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