The new entity, which will keep the Interstate Hotels Corp. name, will operate more than 86,000 rooms in 412 hotels. Representing more than 30 franchise brands in North America and Europe, the company will include BridgeStreet Corporate Housing Worldwide and Doral Resorts & Conference Centers. Its 2002 pro forma revenue is estimated at $340 million and EBITDA of $33 million to $35 million is expected. Value of the deal is roughly $68 million.
Though it will retain a strong presence in Pittsburgh, the company will be headquartered in Washington, DC. Paul W. Whetsell, MeriStar chairman and CEO, and John Emery, president and COO, will continue in those roles for the merged company. Interstate's chairman and CEO Thomas F. Hewitt will serve on new board of directors. The board initially will include six members nominated by MeriStar and seven members nominated by Interstate, five of which will initially be representatives from Interstate's investor group.
"The merger will create an independent hotel management company with a portfolio of more than 400 properties in the United States, Canada and Russia, which will allow us to achieve significant economies of scale," says Whetsell. "We expect synergistic corporate savings of between $8 million and $10 million on an annualized basis. The merger will be accretive to stockholders in 2002."
Interstate stockholders will receive 4.6 shares of "The merger will create an independent hotel management company with a portfolio of more than 400 properties in the United States, Canada and Russia, which will allow us to achieve significant economies of scale," said Whetsell. "We expect synergistic corporate savings of between $8 million and $10 million on an annualized basis. The merger will be accretive to stockholders in 2002."
The stockholders meetings and the closing are expected to occur in the third quarter of 2002. MeriStar or Interstate may each receive from the other a termination fee of $2 million plus up to $500,000 in expenses if the merger agreement is terminated by the other party under various circumstances.
"Due to economies of scale, a larger customer base, and an improved capital structure, the merged company will have expanded avenues of growth," Emery said. "The new company will have a real estate joint venture in place to acquire $300 million to $500 million of hotel assets, and up to $50 million of cash and availability on its line of credit to participate in joint ventures."
The new company will combine MeriStar's 277 managed hotels with Interstate's 135 properties. Company officials say it will be the largest independent operator of full-service Marriott, Hilton and Sheraton hotels, operating properties in 45 states, the District of Columbia, Canada and Russia. The company also will include MeriStar's BridgeStreet Corporate Housing Worldwide division with more than 3,300 units in the United States, Canada and Europe.
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