The merger agreement will add 109 primarily full-service hotels with more than 28,000 keys to the FelCor portfolio and create a second significant relationship for the REIT with Bristol and Bass PLC through Holiday Hospitality and the recently announced acquisition of Inter-Continental. The average Bristol hotel acquired has 266 keys and more than 8,000 square feet of meeting space. The average cost for the hotels to FelCor is approximately $66,000 per key.
In addition to its current standing as the largest owner of Promus-branded hotels, FelCor will also become the world's largest owner of Crowne Plazas (upon completion of conversions) and other Holiday Hospitality branded hotels. The Bristol repositioning strategy is very similar to FelCor's strategy with Promus-branded hotels such as Embassy Suites(R) and Doubletree Guest Suites(R). FelCor expects to change its name upon closing of the transaction to FelCor Lodging Trust.
Prior to the merger, Bristol will spin off, as a taxable dividend, all of its non-real estate holdings into a newly formed public company to be known as Bristol Hotels Resorts, Inc. ("New Bristol"). New Bristol will become one of FelCor's two major tenants, with long term leases on all of the Bristol hotels included in the merger. New Bristol will continue to be Holiday Hospitality's largest franchisee and will commit to add 8,700 Holiday-branded rooms over the next five years. New Bristol will continue to aggressively pursue management of larger, full-service hotels which can be redeveloped and repositioned.
Under the terms of the merger, each of Bristol's 46.3 million outstanding common shares will be exchanged for .685 shares of FelCor common stock. In addition, Bristol shareholders will receive a taxable distribution of one share of New Bristol common stock which is expected to be valued between $2.50 and $3.50 a share. A special cash distribution of excess earnings and profits, estimated at $0.85 per share, is expected to be paid to each of the shareholders of the merged company at the end of 1998. Bass PLC, which currently owns 32% of Bristol, will reduce its ownership in New Bristol to 9.9%, in order to ensure compliance with REIT requirements.
At closing, FelCor shareholders will own approximately 60% of the company; Bristol shareholders will have a 40% stake. Bass PLC and Hampstead Group Partnerships, which each currently own 31% of Bristol, will each have an approximate 13% equity stake in FelCor. Both sets of investors have said they will vote their shares in favor of the merger, subject to the completion of final documentation. Outstanding Bristol options will split into options for both FelCor and new Bristol shares. The existing vesting schedules at both FelCor and Bristol will continue with no options vesting for change of control.
The transaction has received fairness opinions from FelCor's investment advisor, BT Wolfensohn and Bristol's investment advisor, Merrill Lynch. The agreement is subject to shareholder approval and other customary conditions.
FelCor and New Bristol will be completely independent public companies, with no overlap in management or boards of directors. However, three current Bristol board members will resign and become FelCor board members: Donald J. McNamara, Chairman of The Hampstead Group; Richard North, Financial Director of Bass PLC; and Robert Lutz, Chairman and CEO of Amresco, Inc.
Both companies will maintain their existing headquarters facilities in Dallas and no layoffs are expected at either company. FelCor will continue to operate as a REIT. New Bristol will operate as a C-corporation and will apply for listing on the New York Stock Exchange.
Both FelCor and Bristol have experienced phenomenal growth over the past five years, expanding from a small collection of hotels into two of the largest U.S. hotel companies, respectively. The combined portfolio had a 1997 occupancy of 72.7%, an average daily rate of $89.34 and a RevPAR of $64.95, all significantly better than the industry averages. Both companies have demonstrated superior earnings performance over this time and both expect expanded growth opportunities as a result of the merger.
FelCor will expand its potential acquisition pool with its new alliances with Bristol and Holiday Hospitality and will diversify its portfolio both geographically and by asset class, adding hotels in many key markets and broadening its portfolio in the upscale and full-service hotel segments. While continuing to grow its relationship with Promus, FelCor will have exciting new opportunities with the rapid expansion of the Crowne Plaza brand and Holiday Hospitality's dramatic quality improvement initiatives with respect to the Holiday Inn Hotels. Holiday Hospitality has more than 2,500 hotels worldwide.
"This new relationship with Bristol and the acquisition of this portfolio of hotels is a natural extension of FelCor's original business plan of partnering with top brand managers and acquiring hotels at below their replacement cost," said Thomas J. Corcoran, Jr., president and CEO of FelCor. "Having acquired a large percentage of the upscale all-suite hotel market, expanding our presence in the upscale and full-service markets is the next logical step for FelCor. Importantly, this transaction adds a new leg of growth for FelCor through the significant acquisition pipeline represented by the Holiday system."
Bristol is known for its superior operating, marketing, and design/construction organizations and the fact that its senior management has been in place for 17 years. This infrastructure stays in place and can be leveraged to drive strong growth for both companies. Acting as tenant/operator, with access to FelCor's lower cost of capital, New Bristol will continue to aggressively pursue the acquisition, redevelopment and repositioning of under-valued hotel assets. In addition, New Bristol will explore other opportunities to lease and/or manage hotels for third parties and to provide selected services to other hotel companies.
"Since going public in 1995, Bristol has been one of the fastest growing hotel companies and we have generated great returns for our shareholders," said Peter Kline, president and CEO of Bristol. "However, it has become clear that the REIT structure is the most efficient for the ownership of hotels. This merger will allow our shareholders to receive a superior valuation on our real estate earnings and an attractive current income through FelCor's dividend, while continuing to benefit from our unparalleled expertise in the redevelopment, repositioning and management of full service hotels."
FelCor Suite Hotels, Inc., was formed in July 1994 by the founding President of Embassy Suites hotels, Hervey A. Feldman, and his partner and long-time hotel and restaurant executive Thomas J. Corcoran, Jr. The company is the only real estate investment trust (REIT) focusing on upscale, full-service hotels and suites and is the world's largest owner of Embassy Suites hotels. Its current portfolio of 75 hotels contains an aggregate of 18,281 suites and rooms and consists of 52 Embassy Suites hotels (of which 28 were converted from other brands); 14 Doubletree Guest Suites hotels; seven Sheraton hotels (five of which are upscale, full-service traditional non-suite hotels); one Hilton Suites hotel and one Radisson hotel (pending conversion). FelCor's total market capitalization is approximately $2.1 billion.
Dallas-based Bristol Hotel Resorts is one of the largest owner/operators of full-service hotels in North America. With the addition of the Omaha Hotel, Inc. acquisition expected to close in the second quarter of 1998, the company's total number of hotels increases to 121, representing more than 32,000 rooms in 25 states and Canada. Bristol hotels operate in the mid-priced to upscale segments of the industry and are located in 19 of the top 25 lodging markets in the U.S. Bristol acquired the 60 company-owned and managed Holiday Inn hotels from Bass PLC of the United Kingdom for $665 million and with the new acquisition of Omaha Hotel, Inc., will own and operate a total of 89 Crowne Plaza and Holiday Inn properties. The company is a leading franchisee in Holiday Hospitality's billion dollar modernization program; and by the year 2000, Bristol will have invested more than $400 million in the redevelopment of Crowne Plaza and Holiday Inn hotels.
With the exception of historical information, the matters discussed
in this news release include "forward looking statements" within the meaning
of the federal securities law and are qualified by cautionary statements
contained herein and in FelCor's filings with the Securities and Exchange
|Current Equity Market Capitalization||$1,146 million||$1,611 million||$2,757 million|
|Net Debt||$694 million||$459 million||$1,153 million|
|Current Total Market
|$1,840 million||$2,070 million||$3,910 million|
|1997 RevPAR Growth||7.5%||9.5%||8.3%|
|1997 Hotel Acquisitions||$773 million||$700 million||$1.473 billion|
|* Combined reflects an exchange ration
of 0.685 FelCor shares for each
(a) Statistics pro forma for Omaha Hotels, Inc. acquisition, except 1997
|Market Cap Total||$3,910|
|Net Debt to Capital Ratio||29.5%|
| * Combined reflects an
exchange ration of 0.685 FelCor shares for each Bristol share.
(a) Statistics pro forma for Omaha Hotels, Inc. acquisition, except 1997 performance figures.
|All Suite Upscale|
|Doubletree Guest Suites||14||2,713||0||0||14||2,713|
|Crown Plaza Suites||0||0||1||295||1||295|
|Upscale Full service|
|Holiday Inn Select||0||0||4||1,432||4||1,432|
|Holiday Inn Suites||0||0||1||285||1||285|
|Holiday Inn Express||0||0||6||842||6||842|
Financial Officer, 972-444-4932, both of FelCor Suite Hotels
Glen Orr or John Hastings of Bustin Company,
Jeff Mayer, Senior Vice President Chief Financial Officer, 972-391-3100, or Ed Nolan, Vice President Corporate Finance, 972-391-3231, both of Bristol Hotels Resorts
Doug Donsky, 212-303-7608, or Owen Blicksilver, 212-303-7603, both of Principal Communications, for Bristol Hotels Resorts