Blackwells Capital and Bennett's Truce: A Financial Shift

Blackwells Capital and Bennett's Hospitality Companies Reach Truce in Proxy Battle

Blackwells Capital and Bennett's hospitality companies have reached a truce. Blackwells, previously aiming to remove Bennett from the board of Braemar Hotels and Resorts, has agreed to abandon its proxy fight. In return, Braemar is expanding its board and dropping a lawsuit against Blackwells.

In a notable financial twist, Blackwells is set to acquire 3.5 million shares of Braemar, with the deal being financed by Braemar. Prior to this arrangement, Blackwells already owned over 1.2 million shares of Braemar and had options on an additional 250,000, which they could exercise in October. They also hold shares in another Bennett REIT, Ashford Hospitality Trust.

As part of the agreement, Braemar will add an independent director to its board, in consultation with Blackwells. In return, Blackwells will back Braemar's board nominees for the next decade. This deal marks a significant shift from earlier this year when Blackwells successfully opposed Bennett at Ashford, despite his later reappointment.

The battle became quite intense, with both sides launching websites and engaging in social media attacks. However, those sites are now offline, and attention has shifted to the new agreement. Blackwells had previously attempted to acquire Braemar at a higher price, but that deal fell through. They are now moving forward with this new arrangement, which should bring stability to both companies.

Key Takeaways

• Blackwells Capital ends proxy battle with Monty Bennett's companies.
• Blackwells to buy 3.5 million shares of Braemar Hotels & Resorts.
• Braemar expands board and drops lawsuit against Blackwells.
• Blackwells withdraws director nominations and agrees to a 10-year standstill.
• Proxy battle included heated exchanges and deactivated websites.

Analysis

The truce between Blackwells Capital and Monty Bennett's hospitality firms stabilizes Braemar Hotels & Resorts and Ashford Hospitality Trust. Blackwells' acquisition of additional Braemar shares, financed by Braemar, enhances its stake and influence. This move likely aims to align interests and mitigate future conflicts. The expanded board and 10-year standstill agreement reduce short-term volatility but may limit strategic flexibility. Long-term, this consolidation could bolster investor confidence and operational efficiency, though it may also curb innovation and independence.

Did You Know?

• Proxy Battle:
  • A proxy battle occurs when a group of shareholders, often led by an activist investor or a dissident shareholder, seeks to gain control of a company's board of directors by rallying other shareholders to vote for their slate of nominees. This is typically done by soliciting proxies, which are voting rights assigned by shareholders to another party. In this case, Blackwells Capital aimed to remove Monty Bennett from the board of Braemar Hotels and Resorts.
• REIT (Real Estate Investment Trust):
  • A Real Estate Investment Trust is a company that owns, operates, or finances income-producing real estate. REITs allow individuals to invest in large-scale, income-producing real estate in a liquid format. They offer investors high yields, low correlation of returns to other assets, and diversification benefits. Both Braemar Hotels and Resorts and Ashford Hospitality Trust are examples of REITs in the hospitality sector.
• Standstill Agreement:
  • A standstill agreement is a contract between two parties, typically in a corporate context, where one party agrees to limit its activities that might affect the other party's business. In this case, Blackwells Capital agreed to a 10-year standstill, meaning they will not engage in further proxy fights or other actions that could disrupt Braemar Hotels and Resorts' operations or governance for the next decade. This type of agreement helps to stabilize the company and prevent future conflicts.