On Friday, Blackwells Capital nominated new members for half of Braemar
Hotels & Resort’s board after trying to acquire the company in December. Braemar
says it is rejecting the nominations.
DALLAS — Dallas-based REIT Braemar
Hotels & Resorts (BHR) has stated that it is rejecting four board nominations from New
York City-based Blackwells Capital in a proxy fight from the activist investor.
“The
board has unanimously determined that Blackwells’ nomination notice is invalid
due to numerous deficiencies, most notably a failure to disclose the fund’s
true objectives — which Braemar believes include an underhanded attempt to
effectuate a takeover of the company without paying an adequate price,” BHR
said in a press release on Monday.
On
Friday, Blackwells Capital filed a proxy statement nominating four members to
the company: Michael Cricenti, Jennifer Hill, Betsy McCoy, and Steven Pully.
According to analysts at R.W. Baird, Blackwells only owns 10,100 shares of Braemar
stock—100 purchased in June 2023 and 10,000 purchased on March 4, 2024. The
analyst said the four proposed board members do not own any stock.
On
December 1, 2023, R.W. Baird said Blackwells offered to acquire Braemar for
$4.50 a share, but financing and terms were not disclosed and “subsequent
negotiations were minimal.” The analyst said on March 11, Blackwells withdrew
interest in the acquisition, although Braemar disputes that in its press
release.
“Blackwells
is not Braemar’s first activist – Weisman Group and Sessa in 2016 – and it is
clear, in our view, that (1) conflicts exist among the various Ashford entities
and (2) stock performance has been poor,” an R.W. Baird note said. “The conflicts are
disclosed and well known, in our opinion, and they have caused BHR shares to
trade at a discounted valuation; the incentive to grow with an elevated cost of
capital has impacted BHR shareholder value over time.”
On
Monday, Braemar also said it had filed a complaint in the U.S. District Court
for the Northern District of Texas to prevent Blackwells from proceeding with
its proxy contest.
“Our
first priority is protecting the rights of all our shareholders – which is why
we are taking the steps announced today. We are always open to engaging with
shareholders and exploring opportunities to maximize value. However, 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,” Monty Bennett, founder and chairman of Braemar, said in the press release.
Blackwells’
interest in the company was first disclosed in December by The Dallas Express,
a newspaper owned by Bennett, who is also chairman of Dallas-based REIT Ashford
Hospitality Trust.
R.W.
Baird said a two-thirds vote is needed to win for Blackwells’ proposal, which
is a high hurdle for any activist.