Ashford Agrees to Acquire Remington’s Hotel Management Business

DALLAS—Ashford Inc. has signed a definitive agreement to acquire the hotel management business of privately held Remington Holdings LP for a purchase price of $275 million, payable by the issuance of $275 million of a new Series D Convertible Preferred Stock. The transaction, which is expected to close sometime in the fourth quarter of 2019, is subject to approval by the company’s stockholders, the receipt of an acceptable Private Letter Ruling (PLR) from the Internal Revenue Service and customary closing conditions.

“The proposed acquisition of Remington’s high-margin hotel management business will immediately add scale, diversification and an enhanced competitive position for Ashford in the hospitality industry, while also expanding the breadth of services we offer to our advised REITs,” said Monty J. Bennett, Ashford’s chairman and CEO. “With deep industry experience and mutual exclusivity agreements in place with our advised REITs, we believe the acquisition of Remington’s hotel management business represents a compelling opportunity for Ashford to further diversify its earnings stream and, moving forward, the potential to expand business to other third-party clients.”

Remington is an independent hotel management company with more than 40 years of experience in the hospitality business that is owned by Monty J. Bennett and Archie Bennett Jr. Remington’s hotel management business currently provides comprehensive and cost-effective hotel management services for both Ashford Hospitality Trust Inc. and Braemar Hotels & Resorts Inc., according to the company. Remington’s portfolio consists of almost 90 hotels with more than 17,400 rooms of full-service and select-service properties representing more than a dozen brands across 28 states as well as the District of Columbia. In 2018, Remington had adjusted EBITDA of approximately $23.4 million.

At this time, Remington’s hotel management business has very little third-party business outside of the company’s advised REITs, which will be an area the company will focus on growing going forward.

Based on 2018 financial results, the acquisition multiple equates to 11.8x adjusted EBITDA, which compares to an average of 16.5x for recent comparable transactions.  In the previous transaction for Remington’s project management business, the sellers received $203 million of Series B Convertible Preferred Stock. For this transaction involving Remington’s hotel management business, that $203 million of Series B Convertible Preferred Stock will be exchanged for $203 million of Series D Convertible Preferred Stock (such that, after the transactions, $478 million of Series D Convertible Preferred Stock, and no Series B Convertible Preferred Stock, will be outstanding).  The new Series D Convertible Preferred Stock will be convertible into shares of common stock at a price of $117.50 per share (a 164% premium to the closing price of Ashford’s common stock on May 31, 2019, of $44.52).  Dividends on the Series D Convertible Preferred Stock will be payable at an annual rate of 6.59% in the first year, 6.99% in the second year, and 7.28% in the third year and each year thereafter. The company believes the Series D Convertible Preferred Stock is attractively priced financing for this transaction.  The year-one dividend on $275 million of the Series D Convertible Preferred Stock that will be issued in exchange for Remington’s hotel management business equates to $18.1 million.  When compared to the 2018 Adjusted EBITDA for Remington’s hotel management business of $23.4 million, the dividend is easily covered. Voting rights of the Series D Convertible Preferred Stock will be on an as-converted basis, and the holders of the convertible preferred stock will have a voting limit of 40% of voting securities until August 8, 2023.

After the completion of this transaction, Ashford will add hotel property management to its growing list of hotel-related businesses, which already includes hotel asset management, Premier Project Management, J&S Audio Visual, OpenKey, Pure Wellness, Red Hospitality & Leisure, and Lismore Capital.  Now, when its advised REIT platforms acquire hotels, Ashford will have the exclusive right to provide all of these services to those hotels. These services include hotel asset management, hotel property management, project management, design, architecture, procurement, purchasing, construction management, audio/visual services, debt placement, real estate brokerage, mobile roomkey services, hypoallergenic hotel rooms, and watersports activities and travel and transportation services.

The company’s board of directors formed a special committee of independent and disinterested directors to analyze, negotiate, and recommend the transaction to Ashford’s Independent Directors. Ashford’s Independent Directors have unanimously recommended approval of the acquisition by Ashford’s stockholders.

Ashford’s special committee was advised by Janney Montgomery Scott LLC as financial advisor, Norton Rose Fulbright US LLP acted as the special committee’s legal advisor for corporate matters, and Locke Lord LLP acted as the company’s legal advisor for tax matters. Robert W. Baird & Co., Inc. acted as Remington’s financial advisor, and Baker Botts L.L.P. acted as Archie and Monty Bennett’s and Remington’s legal advisor.