Cerberus Capital and Khimji Brothers’ Highgate to Acquire La Quinta-Branded Hotel REIT

Posted on 11/09/2021

Listed REIT CorePoint Lodging Inc. is a pure play select-service hotel owner strategically focused on the midscale and upper-midscale segments. On November 6, 2021, a joint venture between affiliates of Highgate (Highgate Hotels, L.P.) and Cerberus Capital Management, L.P. inked a deal to acquire CorePoint Lodging Inc. Under the terms of the merger agreement, Highgate and Cerberus will acquire all outstanding shares of CorePoint common stock in an all-cash transaction valued at approximately US$ 1.5 billion based on the $15.65 per share consideration, which reflects the assumption of current net debt and a $160 million buyer liability reserve for the Internal Revenue Service (IRS) matter detailed below. This price represents a premium of approximately 42% to CorePoint’s closing share price on July 13, 2021, the last trading day prior to the Company’s public announcement of its strategic alternatives process. In addition to the $15.65 per share payable in cash at closing, CorePoint stockholders may receive incremental cash consideration per share pending timely resolution of the previously disclosed tax proceedings with the IRS related to an ongoing audit of CorePoint entities, which began prior to the Company’s 2018 spin-off from La Quinta Holdings, Inc. Pursuant to this settlement offer, the CorePoint Lodging estimates the total payment amount pursuant to the settlement will be approximately US$ 155 million.

CorePoint’s portfolio consists of primarily La Quinta branded hotels.

Highgate is a real estate investment and hospitality management company with over US$ 15 billion of assets under management. The Khimji brothers (Mahmood and Mehdi Khimji) founded Highgate in 1988.

J.P. Morgan Securities LLC is serving as lead financial advisor to CorePoint, Hodges Ward Elliott, LLC as co-advisor, and Simpson Thacher & Bartlett LLP as legal counsel to CorePoint.

Deutsche Bank Securities Inc. is serving as financial advisor to Highgate and Cerberus. Additionally, Deutsche Bank and Bank of Montreal provided a debt financing commitment to Highgate and Cerberus on this transaction. Latham & Watkins LLP and Kirkland & Ellis LLP acted as legal counsel to Highgate and Cerberus.

Keywords: Highgate Capital Investments, L.P.

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