8-K: Braemar Hotels & Resorts Rejects Activist Investor's Board Nomination, Citing Deficiencies and Takeover Attempt

Braemar Hotels & Resorts has rejected a director nomination from Blackwells Capital, alleging it's a disguised attempt to take control of the company without paying a fair price.

Summary

• Braemar Hotels & Resorts has rejected a nomination notice from Blackwells Capital to nominate four individuals to its eight-person board.
• The board deemed the nomination invalid due to numerous deficiencies, including a failure to disclose Blackwells' true objectives, which Braemar believes is an attempt to take over the company without paying an adequate price.
• Braemar has filed a complaint in the U.S. District Court for the Northern District of Texas to prevent Blackwells from proceeding with an illegal proxy contest.
• Blackwells owns approximately 10,100 shares of Braemar, representing about 0.015% of the shares outstanding, or a $20,000 investment.
• Braemar claims Blackwells misrepresented its interest in acquiring the company at a price significantly below its intrinsic value.
• Blackwells submitted a proposal to buy Braemar on December 1, 2023, but failed to provide necessary information to assess the viability of the bid.
• Braemar's portfolio delivered the highest revenue per available room (RevPAR) in the publicly traded lodging REIT industry during fiscal year 2023, with a RevPAR of approximately $307.
• Braemar's RevPAR growth since 2014 is approximately 79%, outperforming the full-service lodging REIT peer average growth of approximately 28%.
• The company has refinanced or extended nearly all of its 2024 debt maturities totaling approximately $300 million.
• Braemar's portfolio delivered a hotel EBITDA per key of approximately $49,200 in fiscal year 2023, ahead of the peer average of approximately $35,700.
• Since 2013, Braemar has acquired 11 hotels that have delivered an attractive average yield on cost of 8.5% on a trailing 12-month basis as of December 31, 2023.

Sentiment

Score: 3

Explanation: The document reveals a significant conflict with an activist investor, which is a negative development. While the company highlights its strong performance, the potential for a hostile takeover and the legal battle create uncertainty and negative sentiment.

Positives

• Braemar achieved the highest RevPAR in the publicly traded lodging REIT industry during fiscal year 2023.
• The company has demonstrated strong RevPAR growth since 2014, outperforming its peers.
• Braemar's hotel EBITDA per key exceeded the peer average in fiscal year 2023.
• The company has successfully refinanced or extended a significant portion of its debt maturities.
• Braemar has a track record of acquiring hotels that deliver an attractive average yield on cost.

Negatives

• Blackwells Capital is attempting to gain control of the board with a very small investment.
• Blackwells is accused of misrepresenting its intentions and failing to disclose its true objectives.
• Braemar has had to file a complaint to prevent Blackwells from launching an illegal proxy contest.
• Blackwells has a history of using similar tactics with other companies, including extracting settlement payments.

Risks

• The ongoing legal battle with Blackwells could be costly and time-consuming.
• The proxy contest could create distraction and uncertainty for the company.
• Blackwells' actions could negatively impact Braemar's share price.
• There is a risk that Blackwells could succeed in its takeover attempt, potentially at a price below Braemar's intrinsic value.
• The company's forward-looking statements are subject to various risks and uncertainties, including market conditions and competition.

Future Outlook

The company's future plans are subject to risks and uncertainties, including the outcome of the legal battle with Blackwells and market conditions. Braemar is focused on driving strong results across its portfolio to enhance shareholder value.

Management Comments

• Monty J. Bennett, Founder & Chairman of Braemar, stated: 'Our first priority is protecting the rights of all our shareholders.'
• Monty J. Bennett also stated: 'We are always open to engaging with shareholders and exploring opportunities to maximize value.'
• Monty J. Bennett also stated: 'Blackwells has not only disregarded Braemar's bylaws, it has launched a proxy contest for effective control of the Company's Board while masking its real intentions and owning only a de minimis number of shares.'

Industry Context

This announcement highlights the increasing trend of activist investors targeting publicly traded companies. The conflict between Braemar and Blackwells is a specific example of a broader trend of activist investors seeking to influence company strategy and governance. The lodging REIT industry is competitive, and companies are under pressure to maximize shareholder value.

Comparison to Industry Standards

• Braemar's RevPAR of approximately $307 in fiscal year 2023 was the highest among publicly traded lodging REITs, outperforming peers such as HST, RHP, PEB, SHO, XHR, DRH and PK, which averaged approximately $196.
• Braemar's RevPAR growth of approximately 79% since 2014 significantly exceeded the peer average growth of approximately 28%, which included companies such as HST, RHP, PEB, SHO and DRH.
• Braemar's hotel EBITDA per key of approximately $49,200 in fiscal year 2023 was higher than the peer average of approximately $35,700, indicating strong operational performance compared to its competitors.

Legal Proceedings

• Braemar has filed a complaint in the U.S. District Court for the Northern District of Texas against Blackwells Capital.

Stakeholder Impact

• Shareholders face uncertainty due to the proxy contest and potential takeover attempt.
• Employees may experience anxiety due to the potential changes in company control.
• Customers may be unaffected in the short term, but long-term changes could impact their experience.
• Suppliers and creditors may be concerned about the company's stability and future direction.

Next Steps

• Braemar will continue to pursue legal action against Blackwells.
• The company will prepare for the 2024 Annual Meeting of Stockholders.
• Braemar will continue to focus on driving strong results across its portfolio.

Key Dates

Keywords

Braemar Hotels & Resorts, Blackwells Capital, proxy contest, director nomination, takeover, RevPAR, EBITDA, hotel REIT, activist investor, shareholder value