The offer by CPOF is a 35% premium to Friday's closing shareprice of $7.01. In early afternoon trading Monday, shares of thecompany were trading at $8.15, up 15% on the day, and had traded ashigh as $8.66 earlier in the day. The company's 52-week range is$6.45-$13.25. In afternoon trading Wednesday, shares were tradingat $8.02, up $0.06 on the day.

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In its offer letter, COPF principal Daniel R. Baty stated thatCOPF could accomplish its necessary due diligence review within 60days. "We are prepared to proceed immediately with discussions andour due diligence review in anticipation of signing a definitivemerger agreement upon the execution of a confidentialityagreement," he states.

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SEC filings show that private discussions between ColumbiaPacific and the Red Lion board began in April but were broken offby Red Lion without agreement on a buy-out, according to Loeb. "Assuch, we expect this is likely just the beginning of the story," hetold clients Monday.

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Given that Red Lion's capital structure does not leavesignificant room for additional debt in a take-private, Loeb statedthe buyout likely would require equity of approximately $175million. Other potential buyers could include Carlson Hotels,Choice, Wyndham or, secondarily, Intercontinental or GlobalHyatt.

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Loeb believes Red Lion can create substantial shareholder valueby increasing the geographic distribution of the brand throughownership, joint ventures, and franchising. "The brand's regionalsize might be a bit of a work-in-progress before its value ismaximized, which would be the board's case should it reject thepublic offer," he says. "The biggest challenge to the board will bebalancing the historically low multiples seen in today's publichotel markets with recent RLH share performance and the long-runvalue potential of the company."Columbia Pacific Opportunity FundLP includes Alexander B. Washburn, Daniel R. Baty, Stanley L. Batyand Brandon D. Baty. The principal business address of theReporting Persons is 1910 Fairview Avenue East, Suite 500, Seattle,Washington 98102. Columbia Pacific Advisors LLC serves as theinvestment manager of Columbia Pacific Opportunity Fund. Washburnand the Batys serve as the managing members of the CPA and areprimarily responsible for all investment decisions regarding eachFund's investment portfolio.

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Loeb says Columbia Pacific might only be interested in the realestate, not the company. "It's possible Columbia Pacific sees RLHas a pure real estate play where it can sell the company's realestate and entertainment business in a public to privatearbitrage," he says. "Our scenario analysis of this possibilitysuggests substantial upside to current levels, perhaps to $17 inliquidation, though the execution of this strategy is challenged intoday's financing environment."

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