the Baymont Franchise System of 84 Hotels
for $395 million in Cash
to Grow to More Than 550 Hotels
Dallas (July 15, 2004) – La Quinta Corporation (NYSE: LQI) today announced that it has entered into a definitive agreement with The Marcus Corporation (NYSE: MCS) to purchase substantially all of the assets of Marcus’ limited service lodging division for a total purchase price of approximately $395 million in cash, excluding eight joint ventures, subject to certain adjustments.
La Quinta will purchase the real estate and franchise rights and will assume the operation of the Marcus owned properties and the Baymont franchise system. As part of the agreement, La Quinta will acquire 86 Baymont Inns & Suites (including one management contract), seven Woodfield Suites and one Budgetel. In addition, La Quinta will acquire all of the trade rights associated with the Baymont, Woodfield Suites and Budgetel brands, and the current Baymont franchise system of 84 hotels (containing 7,074 rooms). The 178 hotels (containing 16,837 rooms) are located across 32 states, with approximately half of the hotels in the Midwest region of the U.S.
“We are pleased to bring Baymont into our La Quinta family,” said Francis W. (“Butch”) Cash, President and Chief Executive Officer of La Quinta. “In Baymont, we found a quality lodging brand managed by strong operators. Baymont has created a culture, like ours, that is centered on the guest.
The current management team has done a great job of investing in their hotels and employees throughout the difficult lodging environment of the last few years. As a result, Baymont is a strong brand positioned for growth.”
“We are excited about the opportunity to create value by leveraging our strengths,” stated Mr. Cash. “Over the past several years, we have made significant improvements to La Quinta by reinvesting in our hotels, improving our guest satisfaction and managing our costs. Our focus on revenue initiatives, such as our electronic distribution systems, frequent stayer program and enhanced salesforce, has led to La Quinta growing its revenue per available room (RevPAR) faster than its direct competitors. La Quinta runs an 18% RevPAR premium to Baymont. We believe we can help Baymont grow its revenues through these systems and programs as well.”
“In addition,” continued Mr. Cash, “we believe we can grow Baymont’s franchising program more aggressively. Since starting our franchising program in 2001, we have grown La Quinta’s franchise system to 100 hotels. We continue to expect to add at least 50 franchised hotels to the La Quinta system per year. We believe we can grow the Baymont brand by at least 25 hotels per year through our franchise-friendly approach. We look forward to providing Baymont franchisees the support and infrastructure that has made the La Quinta franchise program successful.”
For the last twelve months ended February 26, 2004, the Marcus limited service lodging division produced annual revenues of approximately $126 million and operating income of $12 million (which includes corporate overhead allocations, as well as $19 million for depreciation and amortization). With this acquisition, La Quinta Corporation would become a $650 million annual revenue company, employing approximately 9,000 people and would own, operate or franchise more than 550 hotels containing over 62,000 rooms.
La Quinta has obtained a committed financing of $150 million as part of this transaction. This financing and existing cash on hand will fund the purchase price as well as upfront capital expenditures, one-time transaction and integration costs and working capital requirements.
“We are pleased to have increased our geographic diversity into key Midwestern markets at an aggregate price for the owned hotels of approximately $38,000 per key,” said David L. Rea, Executive Vice President and Chief Financial Officer. “With this acquisition, we believe we were able to achieve our strategic objective of gaining an additional limited service lodging brand at a good price while maintaining moderate leverage ratios and strengthening our interest coverage ratios. In addition, we believe that the acquisition of both quality real estate and a brand that we can grow will allow us to leverage our existing investments in our people and technology to create shareholder value.”
The Board of Directors of La Quinta Corporation
has approved the acquisition. Lehman Brothers Inc. acted as advisor to
the Company. Goodwin Procter LLP acted as legal advisor to La Quinta. The
transaction is expected to close later this summer or the early fall, subject
to customary closing conditions, consents and approvals.
About La Quinta Corporation
About The Marcus Corporation
Certain matters discussed in this press release may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995.
Transaction “Fast Facts”
La Quinta Corporation
Teresa K. Ferguson
Manager, Public Relations
La Quinta Corporation
909 Hidden Ridge, Suite 600
Irving, Texas 75038
|Also See:||Marcus Corporation Reports Net Earnings were $2.3 million for the 3rd Qtr 2004; Improved Performance from Baymont Inns & Suites / March 2004|
|Baymont Inns & Suites Stands Tall; Product, Programs lead to Performance / June 2003|
|Baymont Relies On Long-term Strength for Success in 2003 / January 2003|