(Reuters) - Pebblebrook Hotel Trust (PEB.N) said on Wednesday it was ready to discuss the pricing of its all-stock offer with fellow U.S. hotel owner LaSalle Hotel Properties Inc LHO.N, which rejected the bid, saying it undervalued the company.
Earlier this month, Pebblebrook offered 0.8655 of its common shares for each of LaSalle’s share, implying an offer price of $29.95 per share.
The offer represented a premium of 17.4 percent to LaSalle’s trailing 10-day volume weighted average price as of Tuesday, Pebblebrook said. It valued LaSalle at more than $3 billion.
“The proposal reflects neither the value inherent in the company’s portfolio nor its potential for future value creation,” LaSalle said.
LaSalle’s latest statement comes a week after the company wrote to Pebblebrook saying the offer was not in the best interest of its shareholders.
On Wednesday, LaSalle said the offer was made during a short-term dislocation in its share price and raised doubts about Pebblebrook’s “overly-optimistic growth targets”.
However, analysts were optimistic about the proposed merger after Pebblebrook said it was willing to discuss the pricing of the offer, among other issues.
“Since Pebblebrook announced it is prepared to engage, we would assume that this is a proposal that has a good chance of succeeding,” BTIG analyst James Sullivan wrote in a client note, adding the offer price appeared very fair.
If the two hotel owners merge, it would form the second-biggest lodging real estate investment trust in the United States, Pebblebrook said.
The Maryland-based company, which went public around a decade ago, owns several hotels, including InterContinental Buckhead Atlanta and The Westin San Diego Gaslamp Quarter.
The company is led by Jon Bortz, LaSalle’s founder and former chief executive officer.
LaSalle, which made its public debut around two decades ago, owns interests in hotels, including Park Central San Francisco and Westin Michigan Avenue.
Raymond James and BofA Merrill Lynch were the financial advisers to Pebblebrook, while Citigroup Global Markets Inc and Goldman Sachs & Co LLC advised LaSalle.
LaSalle’s shares jumped 18.45 percent to $28.89 in morning trading, while Pebblebrook’s shares rose 6 percent to $35.15.
Excluding Wednesday’s gains, LaSalle’s shares had dropped 11.6 percent in the last 12 months, while those of Pebblebrook had jumped 20.9 percent.
(This version of the story has been refiled to remove extraneous word from paragraph 6)
Reporting by Ankit Ajmera and Arunima Banerjee in Bengaluru; Editing by Arun Koyyur