What: Shares of Ashford Hospitality Prime Inc (NYSE: AHP) are up more than 33% as of 10:45 a.m. EDT on Wednesday. The stock is responding to news that The Weisman Group made an unsolicited offer to acquire the company's assets.
So what: The Weisman Group made public its intention to acquire assets from Ashford Hospitality Prime in an amended 13D filing with the SEC. The Weisman Group and related parties currently own 5.24% of Ashford's outstanding stock.
The Weisman Group proposed acquiring all of Ashford's assets for $1.48 billion, resulting in a cash amount of $20.25 per share of Ashford common stock before deductions for expenses. After a 33% surge today, Ashford Hospitality shares traded for just $15.08 per share as of 10:45 a.m. EDT.
Now what: The market has priced Ashford Hospitality such that the deal is unlikely to go through. Shares currently trade at a rough 26% discount to the acquirer's bid.
Any deal would have to appease a subsidiary of Ashford Inc., which manages the REIT for a fee. Last year, advisory fees tallied to about $17.9 million, a lucrative fee stream the external manager would lose if Ashford Hospitality agreed to a sale.
The Weisman Group is prepared to pay up to $70 million to buy out the contract between Ashford Hospitality and its advisor, according to its proposed offer. Wall Street seems to believe the payday isn't large enough to push Ashford Hospitality Prime insiders and managers to sell out.