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Patriot American Hospitality, Inc. and Patriot American Hospitality Operating Company To Acquire WHG Resorts Casinos Inc.
DALLAS, Oct. 1, 1997 - Patriot American Hospitality, Inc. and Patriot American Hospitality Operating Company, whose shares are paired and trade as one unit (NYSE: PAH), today signed a definitive agreement to acquire WHG Resorts Casinos (NYSE: WHG) for $148 million for WHG's common stock. Under the terms of the acquisition agreement, each share of WHG common stock will be converted into the right to receive .784 paired shares of Patriot American common stock, subject to certain adjustments. WHG owns 100% of the 570-room Condado Plaza Hotel Casino, 50% of the 389-room El San Juan Hotel Casino, and 23.3% of the 751-room El Conquistador Resort Country Club, all in Puerto Rico, as well as a 62% interest in Williams Hospitality Group, Inc., the management company for the three hotels and the Las Casitas Village at the El Conquistador. The acquisition also includes 156 oceanfront acres suitable for development. The transaction is slated to close in January of 1998.
In connection with the merger agreement, Louis J. Nicastro, WHG's chairman and chief executive officer, agreed to vote his WHG common and preferred shares representing approximately 20 percent of the outstanding voting power in favor of the merger agreement, and to grant Patriot American an option to purchase his 300,000 shares of WHG preferred stock. Sumner A. Redstone and National Amusements Inc., major holders of WHG common stock, representing approximately 23 percent of the voting, have also agreed to vote in favor of the merger agreement under certain circumstances.
Assuming approval by WHG shareholders and completion of the merger, the WHG properties will become a part of Patriot American Hospitality Operating Company, which will encompass WHG's management team. According to Paul A. Nussbaum, chairman and chief executive officer of Patriot American, the acquisition represents an important component in the company's long-term strategic plan as the properties will be potentially re-flagged with the Wyndham and Carefree brands.
"By acquiring these top-quality, well-performing assets and adding the Williams Hospitality Group's experienced resort management team, led by Brian Gamache, to the highly regarded management professionals who comprise Patriot American Hospitality Operating Company, we further position the company to maximize the benefits of our newly acquired paired-share structure," Nussbaum said. "This transaction also exemplifies one of our important growth strategies of acquiring revenue-generating extensions to our core business, including championship golf courses and gaming operations, to enhance our bottom line and thereby provide greater value to our shareholders."
According to William W. Evans III, who serves in Patriot American's office of the chairman and negotiated the transaction, "The cost efficiencies resulting from coordinating the operations of Williams Hospitality Group with those of Patriot American Hospitality Operating Company, as well as the continuing robust operations at the hotels, makes this transaction very accretive in 1998, given the size of the transaction," he said.
"This transaction meets very important strategic objectives for both companies," said Louis J. Nicastro, WHG chairman and chief executive officer. "And in my opinion, represents the kind of disciplined, well-conceived consolidation effort that increases shareholder value. I am pleased to serve my shareholders through this transaction, and am delighted to become part of Patriot American, a company that has quickly become one of the leaders in today's 'new' hospitality industry," he said.
Patriot American's acquisition of WHG also represents the company's debut in the casino gaming industry. "While this will be our first experience with gaming operations, we are pleased to be acquiring three of the most distinctive and appealing casinos in the Caribbean," said Nussbaum. "Each of the three casinos has surpassed expectations for performance, and we believe that while not central to the success of the resort properties, they serve to complement what are already world-class assets. Given the impressive growth reported by the company in its recently ended fiscal year, we expect that under the continued management of Williams' senior operating executives, these properties will make a meaningful contribution to our bottom line," he continued.
James D. Carreker, chief executive officer and chairman of Wyndham Hotel Corporation (NYSE: WYN), said the acquisition of WHG also enhances the presence Patriot American will enjoy in the Caribbean upon completion of the company's merger with Wyndham, slated for completion late in this year's fourth quarter. Currently, Wyndham owns the Wyndham Rose Hall Resort in Montego Bay, Jamaica and manages six additional hotels and resorts including: Wyndham Old San Juan Hotel Casino, Wyndham Palmas del Mar Resorts and Villas in Humacao, Puerto Rico; Wyndham Aruba Beach Resort Casino in Palm Beach, Aruba; Wyndham Morgan Bay in Gros Islet, St. Lucia; Wyndham Kingston Hotel in Kingston, Jamaica; and, Wyndham Sugar Bay Resort in St. Thomas U.S.V.I.
"Wyndham has operated successfully in the Caribbean for the last 15 years and, with a firm understanding of that market, we have great respect for the WHG team and the way they have managed their resorts," Carreker said. "The addition of WHG and its properties to Patriot American and, upon completion of our merger, Wyndham International, clearly accelerates our strategy of sustaining a leading position in the Caribbean resort market, and we're very excited to be working with them. Wyndham is the largest upscale brand in the Caribbean, and we are committed to enhancing that position, as evidenced by this transaction," he said.
Brian Gamache and his management team will help Wyndham International establish Patriot American's platform in the Caribbean, Latin American and South American markets, Nussbaum said.
Upon completion of the WHG acquisition, Patriot American will own a total of 14 luxury and conference resort properties, including: The Boulders in Scottsdale, AZ; Carmel Valley Ranch in Carmel, CA; the Peaks Resort and Spa in Telluride, CO; the Lodge at Ventana Canyon in Tucson; the Registry Resort and Spa in Fort Lauderdale; The Buttes in Phoenix; the Hyatt Newporter in Newport Beach, CA; the Valley River Inn in Eugene, OR; the Myrtle Beach Oceanfront Golf Resort; and the aforementioned Wyndham Rose Hall.
"We are excited about the growth opportunities we expect to realize as a new member of the Patriot American family," Gamache said. "We have always believed that the Caribbean offers significant advantages over other resort markets in that it's very accessible via air flights from the continental United States, and are enthusiastic about the synergies we can create with Wyndham International. I speak for my entire team in expressing our enthusiasm about this transaction, and about the pipeline of acquisition opportunities we believe we will create for Patriot and its shareholders in the future," he said.
Terms of the Merger Agreement
The exchange ratio of .784 will be adjusted if the average price of Patriot American paired shares during a specified period before the WHG shareholders' meeting exceeds $31.25 (or, $31.75 and $32.25 if the transaction closes in February or March, respectively) so that shareholders of WHG will receive for each share of WHG common stock. Patriot paired shares having a value equal to such limit multiplied by .784. If the average price of the paired shares during such period is less than $25.50 but greater than or equal to $19.50, the exchange ratio will be adjusted so that WHG shareholders will receive for each share of WHG common stock Patriot paired shares having a value of $20. In the event the average price of paired shares falls below $19.50, WHG will have the right to terminate the merger agreement. On September 30, 1997, the closing price of Patriot American's paired shares was $31.875.
About the WHG Portfolio
The 751-room El Conquistador Resort and Country Club, considered by many to be the most spectacular resort in the Caribbean, offers its guests four unique resort environments in one, including the AAA Five-Diamond Las Casitas Village. With 90 casitas, each offering one to three bedrooms, as well as fully equipped kitchens and balcony views of the Caribbean, Las Casitas Village guests enjoy the most exclusive amenities and service available. In total, this AAA Four-Diamond El Conquistador resort is perfectly designed to accommodate corporate conferences with 100,000 square feet of conference, meeting and ballroom space, plus six swimming pools, seven tennis courts, an Arthur Hills 18-hole championship golf course, 12 restaurants, several bars and lounges, a nightclub, a circular casino with approximately 10,000 square feet of gaming space and a private island offering a full complement of beach and water sports. In addition to its rating by Conde Nast Traveler in 1996 as one of the top 100 resorts in the world, the El Conquistador has been recognized with the prestigious Gold Key Award by Conventions and the Paragon Award by Corporate Meetings and Incentive.
The acquisition of the El Conquistador includes 156 additional acres suitable for future development, including potential timeshare units and additional hotel concepts.
Ranked by Conde Nast Traveler as one of the top 50 tropical resorts in the world, the 389-room El San Juan Hotel Casino is situated on the longest stretch of white-sanded beach in San Juan, in the elegant Isla Verde area. Combining the ambiance of Monte Carlo, the warmth of the Caribbean and a distinct Old World charm, this AAA Four-Diamond and Leading Hotels of the World property features an Olympic-sized swimming pool surrounded by tropical flowers, as well as a fantasy pool overlooking the ocean. The hotel is considered the focal point for the city's nightlife, offering a world-famous casino with 13,500 square feet of gaming space, six award-winning restaurants offering specialty cuisine, rooftop lounges with spectacular city and ocean views, and the mahogany-paneled Palm Court Lobby, considered by many to be among the finest in North America, which punctuates the hotel's dedication to European luxury and elegance. The company is reviewing a potential development at El San Juan similar to Las Casitas, with a 125-unit, all-suite tower under consideration.
The AAA Four-Diamond, 570-room Condado Plaza Hotel Casino, located in San Juan's upscale Condado district, is situated to offer guests balcony views of the Atlantic Ocean and the Condado Lagoon. Considered to be the businessperson's hotel of choice in San Juan, the Condado Plaza caters equally to the leisure traveler, featuring three swimming pools, a secluded beach with coordinated water sports, tennis courts and a state-of-the-art Fitness Center. Patriot American expects the Condado Plaza to benefit from the new 400,000 square-foot convention center under construction across the street, slated to open in 2001. The property also offers the largest and one of the most exclusive casinos in the Caribbean, with 13,000 square feet of gaming space, as well as two lounges, two piano bars, a night club and several upscale restaurants. In 1996, the casino enjoyed the highest table game and slot machine handle in Puerto Rico. WHG recently entered into an agreement to purchase the 127-unit Regency Hotel adjacent to the Condado Plaza.
About WHG Resorts Casinos
WHG Resorts and Casinos, Inc., recognized as one of the finest hotel and resort operators in the Caribbean, was formed in April 1997 as a spin-off from WMS Industries, a leading manufacturer of gaming equipment and video games.
For the fiscal year ended June 30, 1997, WHG Hotels and Casinos reported a 25.7 % increase in income from operations, reaching $17.1 million compared to $13.6 last year. The company reported net revenues of $69.9 million, and net income of $7.3 million.
About Patriot American Hospitality, Inc.
Based in Dallas, Texas, Patriot American Hospitality, Inc. (NYSE: PAH) is currently the nation's second-largest hotel real estate investment trust (REIT) with a portfolio currently comprised of 82 hotels and resorts with approximately 21,456 rooms and, paired together with Patriot American Hospitality Operating Company, is one of only two paired-share hotel REITS in the country.
Having increased the size of its rooms portfolio by approximately 89 percent since January, Patriot American Hospitality, Inc. is continuing to acquire full-service hotel properties throughout North America. The company is proceeding with its acquisition of Wyndham Hotel Corporation (NYSE: WYN) which will become Patriot's paired-operating company upon completion of the transaction, slated for the fourth quarter of 1997, and which in total will create the nation's first fully integrated, branded paired-share REIT.
Forward Looking Statements
Certain matters discussed in this press release may constitute forward- looking statements within the meaning of the federal securities laws. Actual results and the timing of certain events could differ materially from those projected in or contemplated by the forward-looking statements due to a number of factors, including general economic conditions, competition for hotel services in a given market, the availability of equity and debt financing, interest rates and other risks detailed from time to time in the filings of Patriot American Hospitality, Inc. and Wyndham Hotel Corporation with the Securities and Exchange Commission, including quarterly reports on Form 10-Q, reports on Form 8-K and annual reports on Form 10-K. Reference is hereby made to the "Risk Factors" set forth in the Forms 10-K for the fiscal year ended December 31, 1996 filed by Patriot American Hospitality, Inc. and Wyndham Hotel Corporation.
Source: Patriot American Hospitality, Inc.
CONTACT:
Paul Nussbaum, Chairman CEO or Suzanne Cottraux, V.P. of Corporate Communications Investor Relations, of Patriot American, 972-888-8041
Diane Rohlin, Analyst Inquiries, of FRB Chicago, 312-640-6748