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Red Lion Moves Closer to Sale
Columbia Pacific Opportunity Fund is among those looking at the hotel operator's books.
August 5, 2008
Red Lion Hotels Corp. provided a corporate update in the first week of August, disclosing that it has “executed several confidentiality agreements,” with third parties interested in possibly acquiring the hotel operator.
Among those now perusing Red Lion’s books is the Columbia Pacific Opportunity Fund, which has already lodged an unsolicited bid of $9.50 a share for the company. Red Lion management and many analysts who cover the company’s stock have deemed the earlier Columbia Pacific proposal as far too low.
An analyst note in July from RW Baird, obtained on Thomson One Analytics, cited that other possible suitors include strategic candidates Carlson Hotels, Choice, Wyndham, Intercontinental and Global Hyatt. The analysts also hypothesized that the company could fetch as much as $17 a share in a liquidation scenario, which would seem to imply a floor for the bidding.
However, given the state of the market, Red Lion may have trouble convincing buyers to pay that much. “The biggest challenge to the board will be balancing the historically low multiples seen in today’s public hotel markets with recent [Red Lion] share performance and the long-run value potential of the company,” RW Baird analysts wrote in the note.
Red Lion, as of December 2007, controlled 53 hotels located in eight states and one Canadian province. Its sales and Ebitda grew last year, as the company posted earnings of $33 million, on $187 million of revenue. The stock, as of press time on August 5, was valued at around $8.50 a share.
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