Lodgian, Inc. (AMEX:LGN) moved up $1.15, or 9.6%, to $13.13 in early trading today after the company announced that it has initiated a review of possible strategic alternatives aimed at unlocking shareholder value. The company said it has retained Goldman, Sachs & Co. and Genesis Capital, L.L.C., to assist in the review. Lodgian also noted that they would not be providing updates on this process until it is completed and approved by the Board of Directors.
What can shareholders expect? Well, Lodgian is one of the largest independent owners and operators of full-service hotels in the United States. In December of last year, the company announced plans to reduce its portfolio to 43 core properties and
said that it aims to sell 75% of its saleable properties by the end of the year. The sale of its 27 properties currently on the market is expected to generate between $115 and $122 million. This leaves the company with significantly reduced operating cash flows and a significant amount of extra cash. Typically, companies in this situation will approve measures to distribute this extra cash to shareholders - like instituting a dividend. Another possibility is spinning off the company's property holdings into an REIT, shielding them from a lot of taxes and unlocking the properties' true value. Finally, there is always the possibility that the company will put itself up for sale in a market ripe with acquisitions. Regardless, this is definitely a company to
keep an eye on as it moves to adopt measures to unlock shareholder value.
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