Host Funding acquires limited-service and full-service hotels and currently trades on the American Stock Exchange, albeit tenuously. The company owns 11 limited service properties in six states, as well as minority interest in four Mexico hotel properties with a group that owns 34 other properties in that country.
Carnegie is a diversified communications company that provides telephone systems, communications software and support services to hotels and hotel properties. It trades on the over-the-counter bulletin board and currently has pending a $2.1 billion lawsuit against Grant Thornton LLC, its former accounting firm, which it accuses of fraud, negligence and defamation. A court date has been scheduled for Oct. 16 in the Circuit Court of Baltimore City.
At last count, Host Funding had two employees and Carnegie had 106. The merger is scheduled to close April 16, following negotiation of definitive contracts, corporate filing requirements and completion of due diligence. Carnegie is expected end up with 80% to 90% of the combined company. There is still uncertainty about where the new public company will be traded, however.
Host Funding earlier this month was informed by the American Stock Exchange that the company no longer complies with its continue listing guidelines, and that it intends to file an application with the Securities and Exchange Commission to strike Host Funding common stock from listing and registration on the Exchange. Problems include a stock price below $1 per share, issuing shares in a deal without shareholder approval, and holding no annual meeting since mid-1999. The company also is lacking at least two independent directors or an independent audit committee as required.
Host Funding is appealing the delisting and has requested a hearing before an Exchange committee. Farkas had said the merger might help. For the quarter ending Sept. 30, Host Funding's total revenue fell 18% to $2.5 million due to decreased occupancy and room rates. Net loss fell 15% to $1 million due to a decrease in advisory, insurance and legal fees.
Carnegie's recent history isn't much brighter. It recently warned shareholders the closing of two previously announced acquisitions are being delayed indefinitely, and that an expected $8 million venture capital round was canceled, leaving the company without much working capital. Shortly thereafter, the company reported its earnings. For the nine months ended Sept. 30, Carnegie's revenues fell 19% to $13.5 million, due to decreased sales from its telecommunications segment. The company's net loss fell 28% to $5.9 million, due in part to decreased selling, general and administrative expenses.
HFD stock closed up 12 cents Friday at 93.75 cents a share on volume of 2,700 shares. On Dec. 21, its stock price hit a 52-week low of 18.8 cents a share. Meanwhile, Carnegie closed Friday at 12.5 cents a share, up one half a penny on volume of 113,000 shares. "Host Funding shareholders should benefit from the increased liquidity for their stock," said Farkas in announcing the deal.
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
