RLJ Lodging Trust (RLJ.N) said on Monday it would buy peer FelCor Lodging Trust Inc (FCH.N), making it one of the biggest U.S. lodging real estate investment trusts.
The combination, which will have a pro-forma market value of $4.2 billion and an enterprise value of $7 billion, will own 160 hotels in 26 states and the District of Columbia, across brands including Marriott, Hilton, Hyatt and Wyndham.
Under the deal, each FelCor share will be converted into 0.362 shares of newly issued shares of RLJ common stock in a taxable merger.
Based on the RLJ's Friday closing, the offer values FelCor at $1.18 billion, or $8.54 per share, representing a premium of 16.7 percent.
RLJ's shareholders are expected to own about 71 percent of the combined company, while FelCor's shareholders are expected to own the rest, the companies said.
The deal comes two months after lodging REIT Ashford Hospitality Trust Inc (AHT.N) offered to buy FelCor for about $1.27 billion in stock and launched a proxy battle for the control of the company's board.
That proposal was opposed by shareholder and activist hedge fund Land and Buildings Investment Management LLC, which called it "woefully inadequate".
The deal FelCor will help RLJ the become the third-largest standalone lodging REIT by enterprise value, the companies said, behind Host Hotels & Resorts Inc (HST.N) and Park Hotels and Resorts Inc (PK.N). (bit.ly/2p8XMR6)
Ashford Hospitality Trust had an enterprise value of $4.9 billion as of Friday, according to RLJ.
The RLJ-FelCor deal will create annual cost savings of about $22 million from the elimination of duplicate corporate general and administrative expenses.
RLJ Chief Executive Ross Bierkan will lead the combined company after the close of the deal, expected by end of 2017, the companies said.
FelCor will become a wholly-owned subsidiary of RLJ.
Barclays was the financial adviser for RLJ, while Bank of America Merrill Lynch advised FelCor.
(Reporting by Ankit Ajmera in Bengaluru; Editing by Saumyadeb Chakrabarty)