Park Hotels To Buy Out Chesapeake Lodging With 'Laser Focus' On Value Creation

The hotel real estate investment trusts Park Hotels & Resorts PK and Chesapeake Lodging Trust CHSP announced a $2.7-billion merger Monday.

What Happened

Under the terms of the deal, Park Hotels will acquire all outstanding Chesapeake shares, creating a combined company with an estimated enterprise value of $12 billion.

Chesapeake shareholders will receive $11 in cash and 0.628 of a share of Park common stock for each Chesapeake share they hold, according to Monday's press release.

"Upon closing, Park stockholders and Chesapeake shareholders will own approximately 84% and 16% of the combined company, respectively," according to the companies. 

The merger has received approval from the Park Hotels and Chesapeake boards. Once the deal is complete, Park Hotels' board will increase in size to 10 members, with two trustees joining from Chesapeake's board. 

Park said it plans to sell five non-core hotels prior to the closing of the merger. 

Why It's Important

"Chesapeake's high-quality portfolio of hotels will accelerate our strategic goals of upgrading the quality of our portfolio and achieving brand, operator and geographic diversity. This merger provides Park and its stockholders with identifiable synergies and opportunities to drive incremental growth through Park's proven asset management capabilities," J. Baltimore Jr., chairman and CEO of Park Hotels, said in a statement. 

"In short, we are expecting to have the same record of success and growth from the Chesapeake assets that we have enjoyed from the Hilton assets we took over in January 2017 — and we will be laser focused every day to create long-term value."

What's Next

The merger is subject to customary closing conditions, including approval by Chesapeake shareholders. The companies said they expect the deal to close in the late third quarter or early fourth quarter of this year. 

Park Hotels & Resorts shares were falling by 3.7 percent late in Monday's session, while Chesapeake Lodging Trust shares were trading up 7.85 percent. 

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