February 16, 2017 / 10:50 PM / a year ago

UPDATE 1-Ashford Prime feud with Sessa Capital ends in board deal

(Adds details, background)

By Michael Flaherty

Feb 16 (Reuters) - Ashford Hospitality Prime Inc has reached a deal with hedge fund Sessa Capital, agreeing to add three directors to the real estate investment trust’s board in exchange for a two-year truce in a shareholder dispute.

The agreement ends a feud that unfolded last year between the REIT and the hedge fund, which is Ashford Prime’s fourth largest shareholder.

Sessa, which owned 8.5 percent of the stock as of late last year, began a proxy fight against Dallas-based Ashford Prime last spring, nominating five directors to serve on the board.

Ashford Prime invests in luxury hotels and resorts.

A legal spat emerged from the fight, causing Sessa to sue the company in a case that the hedge fund ultimately lost. As a result, Sessa was unable to put its directors up for a shareholder vote.

Other Ashford Prime shareholders nevertheless displayed their frustration with the company and its board. The company said in a release after the annual meeting last June that “withheld” votes exceeded the “for” votes for each of its director nominees.

Sessa prepared to launch another proxy fight this year, according to people familiar with the matter, but the two sides entered talks last month to avoid another contest.

According to the settlement deal struck on Thursday, two of Sessa’s previous director nominees will be appointed to Ashford Prime’s board. The deal also allows the company and the hedge fund to jointly select an additional director.

Two incumbent directors have agreed to step down.

Ashford Prime and Sessa Capital have agreed to dismiss all pending litigation and to various provisions until before its 2019 annual meeting, the company said in a statement.

Ashford Hospitality Prime spun off from fellow REIT Ashford Hospitality Trust Inc in 2013. The assets of both REITs are managed by Ashford Inc whose CEO Monty Bennett is the chairman of all three companies.

“We believe these new independent directors will add additional valuable experience and a fresh perspective to the Ashford Prime board,” Bennett said on Thursday. The market value of all three companies is around $1 billion.

Sessa’s original fight was aimed at the fee Ashford Prime is forced to pay Ashford Inc in the event it is no longer the REIT’s asset manager.

Sessa said last year that shares of the REIT are undervalued and that it should seek a buyer. (Reporting by Michael Flaherty; editing by Chris Reese and Grant McCool)

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