This Hotel REIT Advisor Receives Underwhelming Shareholder Support

chart01After all the pressure from the activist Sessa Capital, Ashford Prime advisors received underwhelming support from shareholders at the annual shareholders meeting last Friday, June 10. Approximately 30% of the voting shares were cast in favor of the slate of directors recommended by the advisor. Running unopposed, Monty Bennett, founder, CEO and chairman of both Ashford Prime and the external advisor, remains in control of the company.

Monty now sees a minority investor base that is sympathetic to his stewardship. The percentage of votes in favor of the advisor were way lower than the previous year’s votes. Last year, Monty Bennett was able to gather the support of about 78% of the voting shares. Ashford Prime’s seven board members, including non-independent Monty and Douglas Kessler, remain in place for another tenure.

chart02The Ashford board also gave the green light to initiate discussions with The Wiseman Group on their “soft” and unsolicited bid to purchase the company for $20.25 a share. The bid is not binding and the potential buyer has clearly stated their intention to continue further discussions.

The market has received the offer with skepticism. The post announcement share price has yet to reach the full bid, with the price jumping from $11 to $14 a share. The truth is that the share price hasn’t even come close to the bid.

I understand the market skepticism stems from several reasons. The main one being that the advisor will not walk away without a good offer for its advisory contract. Even with a questionable confidence from shareholders last Friday, it is unlikely that the advisor will let go without driving a hard bargain.

The negotiations with The Wiseman Group can go either way. However, the majority of the market seems to be placing bets against it. After looking at the post announcement reaction, I would say the likelihood of a successful sale are about a third.

Source: Ashford Hospitality Prime, Inc. (NYSE:AHP)

Disclaimer: This newsletter is not engaged in rendering tax, accounting, or other professional advice through this publication. No statement in this issue is to be construed as a recommendation to buy or sell any security or other investment. Please do your own due diligence before making any investment decision. Some information presented in this publication has been obtained from third-party sources considered to be reliable. Sources are not required to make representations as to the accuracy of the information, however, and consequently the publisher cannot guarantee accuracy.

Disclosure: The author has no positions in any shares mentioned, and no plans to initiate any positions within the next 72 hours.

 

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