The company plans to use the proceeds to pay off taxes due from the transaction. As part of the deal, Jameson will issue 2.18 million shares of its common stock to Kitchin Hospitality owner Thomas W. Kitchin and members of his family. Kitchin is also chairman and CEO of Jameson.
The 120-hotel company, catering largely to business travelers in the Southeast, will lay out the deal to shareholders on Nov. 25. If approved, the transaction is scheduled to close Jan. 1, 2004. The company also has six Signature Inns operating in the Midwest.
"This restructuring is designed to strengthen Jameson's financial position, simplify its corporate structure, eliminate certain perceived conflicts of interest and, over the long term, enhance shareholder value," Kitchin says in a prepared statement.
After the deal is done, Kitchin Hospitality will be a wholly owned subsidiary of Jameson and will function as the hotel operating division of Jameson rather than as a separate lessee, Kitchin says.
Another Kitchin family member, Craig Kitchin, president and chief financial officer of Jameson, says in the same statement, "We have positioned ourselves to be a growth company in the economy sector of the hotel market. We believe that we now have a significant opportunity to grow in our marketplace, but our inability to retain earnings as a hotel REIT is keeping us from reaching our full potential."
"As we look at the opportunities in our market, it has become increasingly clear to us that the company cannot provide both a dividend yield and a high rate of growth for our investor base," he adds. He says he is confident the planned financial restructuring "will improve (Jameson's) financial performance and shareholder return."
He says the company will retain its status as a REIT for the 2003 tax year but will not be required to make any further dividend payments in 2003 to holders of its common stock "in order to satisfy the dividend distribution rules " for REITs.
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