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EXHIBIT 99.1
FOR IMMEDIATE RELEASE
Contact: For Doubletree: For Promus:
William L. Perocchi, CFO John C. Hawkins, Corporate Communications
Doubletree Corporation Promus Hotel Corporation
(602)220-6810 (901)374-5529
Ruth Pachman/Michael Freitag Gregg A. Swearingen, Investor Relations
Kekst and Company Promus Hotel Corporation
(212)521-4800 (901)374-5468
DOUBLETREE CORPORATION AND PROMUS HOTEL CORPORATION
SIGN $4.7 BILLION DEFINITIVE MERGER AGREEMENT
PHOENIX, AZ AND MEMPHIS, TN, SEPTEMBER 2, 1997 - Doubletree Corporation
(NASDAQ: TREE) and Promus Hotel Corporation (NYSE: PRH) today announced the
execution of a definitive merger agreement, creating one of the world's largest
hotel companies with a portfolio of fast-growing upscale and mid-priced brands
including Doubletree Hotels, Embassy Suites, Doubletree Guest Suites, Homewood
Suites, Club Hotels by Doubletree, Hampton Inn, Hampton Inn & Suites, and Red
Lion. This stock-for-stock transaction, valued at approximately $4.7 billion, is
a merger of equals, combining Doubletree's strength in hotel management with
Promus' strength in franchising and building brands.
With approximately $5 billion in annual system-wide revenues under
management contract for franchise agreement, the combined company will be the
lodging industry's third largest revenue producer. As of June 30, the new
company had 1,136 hotels, approximately 172,000 rooms, and more than 40,000
employees in all regions of the United States and its major markets, as well as
selected locations in Latin America and Asia.
The terms of the agreement call for the two companies to be merged into
subsidiaries of a new holding company to be named Promus Hotel Corporation.
Doubletree shareholders will receive one share in the new company for each of
their shares in Doubletree. Promus shareholders will receive 0.925 shares in the
new company for each of their shares in Promus. The transaction is intended to
be accounted for as a pooling-of-interests and is expected to be tax-free. The
merger is
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expected to be accretive to earnings per share in the first full year, excluding
costs related to the transaction. The shares of the new company are expected to
be listed on the New York Stock Exchange.
The companies have agreed that:
- Promus' President and Chief Executive Officer, Raymond E.
Schultz, will serve as Chairman and Chief Executive Officer of
the new company, and as a member of the Board's Executive
Committee.
- Doubletree's President and Chief Executive Officer, Richard M.
Kelleher, will serve as President and Chief Operating Officer
following the merger, and will succeed Mr. Schultz as Chief
Executive Officer upon his retirement. He will also be an
ex-officio member of the Board's Executive Committee.
- The key management team will consist of top managers of both
Doubletree and Promus, including William L. Perocchi,
currently Executive Vice President and Chief Financial Officer
of Doubletree, as Executive Vice President and Chief Financial
Officer, and Thomas L. Keltner, currently Executive Vice
President and Chief Development Officer of Promus, as
Executive Vice President and Chief Development Officer.
- The new company will be governed by a 14-member Board of
Directors, with seven directors designated by each company.
The Board will include Richard J. Ferris and Peter V.
Ueberroth, Doubletree Co-Chairmen, and Michael D. Rose, Promus
Chairman, who will serve as members of the Board's Executive
Committee.
- Each company has granted the other an option to acquire 19.9
percent of its common stock under certain conditions.
Doubletree also announced that it has adopted a Stockholder Rights
Plan, the details of which will be released separately.
Approximately 40% of Doubletree's shareholders, including, among
others, General Electric Pension Trust and Kohlberg Kravis Roberts & Co., have
indicated they intend to vote in
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favor of the merger. GE and KKR will continue to be represented on the Board of
the new company.
Raymond E. Schultz, Promus President and Chief Executive Officer, said:
"This transaction is truly a merger of equals. The combined company will greatly
benefit from the complementary strengths of each partner. Doubletree has grown
rapidly through acquisitions and an aggressive conversion strategy. It has an
outstanding record and reputation as a quality operator and brand marketer of
full service hotels. Promus has grown through franchising and new hotel
development. We have grown our proprietary brands primarily on a one-at-a-time
basis with emphasis on product quality and consistency and our unique 100%
satisfaction guaranteed service culture, which will be extended to all
Doubletree's brands."
Mr. Schultz added, "This merger is a `defining moment' for Promus. We
have achieved a significant presence in the upscale suites and extended-stay
markets, and are the industry leader in the mid-priced limited service segment.
In joining with a quality upscale full-service brand in Doubletree Hotels, as
well as its other brands, the combined company will be able to offer a full
range of quality accommodations to meet the needs of business and leisure
travelers in markets throughout the United States. Our ability to cross-sell and
cross-market our brands will be a key driver of our future growth. We will also
be able to offer to franchisees, developers and investors an even more complete
line of hotel development opportunities in virtually every important segment of
the lodging business.
"The combination of two of the strongest and most successful management
teams in our industry will provide the depth to continue to grow rapidly and
expand to new areas. Rick Kelleher and I worked together for many years, so I
know we share the same values and commitment to product quality, customer
service and creating shareholder value. The cultures of our companies are
remarkably similar and that should make the transition more seamless. We will
immediately form transition task forces so that we will hit the ground running,"
Mr. Schultz continued.
Richard M. Kelleher, President and Chief Executive Officer of
Doubletree Corporation, said, "The merger of Doubletree and Promus is a natural
marriage of two strong institutions with a common heritage and a focus on
growth. Doubletree traces its roots to a company that was one of
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the original franchisees of Embassy Suites. Today, Embassy Suites is the clear
market leader in the upscale all-suites segment and accounts for more than half
of Promus' operating profit. The blending of Embassy Suites and Doubletree Guest
Suites will give the new company an even stronger base on which to build market
share."
"There are also tremendous opportunities for growth in the
extended-stay market, with the upscale Homewood Suites brand complementing
Doubletree's investment in the mid-market Candlewood Hotels brand. Likewise, our
smaller Club Hotels by Doubletree and Red Lion brands will benefit from Promus'
strength as a franchisor and builder of brands. We are also excited about having
Hampton Inn, one of this decade's fastest growing mid-market brands, included in
our combined portfolio."
Mr. Kelleher added, "At a time when the lodging industry is rapidly
consolidating, the merger creates a company with significant free cash flow, one
of the strongest balance sheets in our industry and access to sources of
lower-cost capital than most of our competitors. We are very well positioned to
leverage these financial strengths to accelerate our growth in the future.
Both companies expect to realize substantial synergies and cost savings
from the merger. They will be able to combine their respective reservation
systems, information system development and maintenance, purchasing functions,
accounting, payroll, and many other corporate support functions to provide
substantial efficiencies. The companies said that their preliminary estimated
cost savings and synergies should yield approximately $15 to $20 million
annually. Both companies have preferred vendor programs which provide growing
revenue streams that will benefit from the combined larger room count.
Consummation of this transaction is subject to customary conditions,
including regulatory approvals and approval of the merger by shareholders of
each company. It is anticipated that this transaction will close prior to 1997
year-end.
Morgan Stanley & Co. served as financial adviser to Doubletree and BT
Wolfensohn served as financial adviser to Promus.
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Doubletree Corporation is a leading hotel management company and is the
exclusive franchisor of Doubletree Hotels, Doubletree Guest Suites, Club Hotels
by Doubletree and Red Lion hotel brands.
Promus Hotel Corporation is one of the world's premier lodging
companies and the franchisor and operator of the Embassy Suites, Hampton Inn,
Hampton Inn & Suites, Homewood Suites, Embassy Vacation Resort and Hampton
Vacation Resort brands. Based in Memphis, Tenn., the company currently serves
guests with an unconditional 100% Satisfaction Guarantee in more than 900 hotels
and 115,000 rooms throughout the United States, Canada, Mexico, Latin America
and Asia. A company overview and financial highlights can be found on the
internet by accessing http://www.promus-hotel.com.
Safe Harbor Statement Under the Private Securities Litigation Reform
Act of 1995: The statements contained in this release which are not historical
facts, such as those concerning future financial performance and growth, are
forward looking statements that are subject to change based on various factors
which may be beyond Doubletree's and Promus' control. Accordingly, the future
performance and financial results of the new company may differ materially from
those expressed or implied in any such forward looking statements. Such factors
include, but are not limited to, those described in Doubletree's and Promus'
filings with the Securities and Exchange Commission, as well as various factors
related to the transaction described in this release, including the costs of
integrating their business and the realization of synergies anticipated with
respect to the transaction.
(Fact Sheet Attached)
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DOUBLETREE AND PROMUS MERGER
FACT SHEET
TRANSACTION
- - Merger of Doubletree and Promus to create one of the world's largest
hotel companies.
- - Tax-free exchange of stock into a new issue of a new company to be
called Promus Hotel Corp.
- - Each share of Doubletree will be converted into one share of new
Promus.
- - Each share of Promus will be converted into 0.925 shares of new Promus.
- - The transaction is intended to be accounted for as a pooling of
interests, with no goodwill created.
STRATEGIC RATIONALE
- - Creates a powerful presence in the U.S. hotel market with a portfolio
of brands including:
-Doubletree Hotels
-Embassy Suites
-Embassy Vacation Resort
-Doubletree Guest Suites
-Homewood Suites
-Club Hotels by Doubletree
-Hampton Inn
-Hampton Inn & Suites
-Hampton Vacation Resort
-Red Lion
-Highlights of new Promus Hotel Corp.:
-1,136 hotels (as of June 30, 1997)
-172,000 rooms (as of June 30, 1997)
-#3 in total system-wide revenues under management or franchise
-#4 in market capitalization
-#5 in number of hotels
-#5 in number of rooms
- - Strong balance sheet, increased size and complementary hotel brands
create platform for further expansion
-Full-service segment and international market expansion opportunities
-Further development
- - Compatible organizations
-Complementary lines of business (franchising and management
operations)
-History of delivering shareholder value -#1 in customer satisfaction
index
-Proven ability to grow organically and through acquisitions
-Proven ability to integrate mergers and acquisitions
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DOUBLETREE AND PROMUS MERGER
FACT SHEET CONTINUED
POTENTIAL MERGER BENEFITS
SHAREHOLDERS
- - Promus' franchise and development expertise combined with Doubletree's
management expertise provides significant opportunities for growth.
- - Potential for savings in corporate overhead, information technology,
purchasing, reservation systems and financing costs.
- - Cross-selling opportunities
- - Enhances new and existing developer, franchisee and investor
relationships Increased financial strength
-Larger, more diversified asset base
-Maintains low debt level
- - Strong cash flow from business and increase size enhance prospects for
continued growth
- - Likely reduction in cost of capital
CUSTOMERS
- - Ability to leverage a larger, more diversified portfolio of brand
names
- - Continued focus on providing quality service across entire range of
hotel brands
- - Ability to leverage Doubletree brands through Promus franchise network
EMPLOYEES
- - New company will be one of the strongest and best positioned domestic
U.S. hotel companies
- - Ability to participate both financially and professionally in growth
companies
PRO FORMA FINANCIAL PROFILE
Annual System-wide Revenues under Management or Franchise $5.0 billion
1996 Revenues $937 million
1996 EBITDA $322 million
1996 Net Income $106 million
Book Value (as of June 30, 1997) $1.1 billion
Assets (as of June 30, 1997) $2.4 billion
Debt to Capital (as of June 30, 1997) 40%
Shares Outstanding (as of August 29, 1997) 86 million
Market Capitalization (as of August 29, 1997) $4.0 billion
Enterprise Value (as of August 29, 1997) $4.7 billion
ORGANIZATION
Key Officers:
Chairman & CEO Raymond E. Schultz
President & COO Richard M. Kelleher
Chief Financial Officer William L. Perocchi
Chief Development Officer Thomas L. Keltner
Board of Directors 14 Members (7 each from Promus and
Doubletree)
Employees Approximately 40,000
State of Incorporation Delaware
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DOUBLETREE AND PROMUS MERGER
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FACT SHEET CONTINUED
HOTEL PORTFOLIO (AS OF 6/30/07)
BRAND HOTELS ROOMS REVPAR
Doubletree Guest Suites 42 8,987 $95.34
Embassy Suites 136 32,810 86.97
Homewood Suites 43 4,439 71.84
Doubletree Hotels 101 30,368 70.54
Red Lion 16 2,902 59.29
Club Hotels 19 3,977 51.77
Hampton Inn & Suites 23 2,500 48.75
Hampton Inn 679 73,326 46.00
Non-Branded 77 12,344 58.38
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TOTAL 1,136 171,653
OWNERSHIP HOTELS ROOMS
Owned 45 8,105
Joint Venture 26 7,264
Leased 86 14,448
Managed 164 41,920
Franchise 815 99,916
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TOTAL 1,136 171,653
OTHER INFORMATION
Form of Transaction Merger of equals, stock-for-stock exchange
Subject to Approval of Promus and Doubletree shareholders;
approximately 40% of Doubletree shareholders have
agreed to vote in favor of the merger
Hart-Scott-Rodino review
Expected Closing By year-end 1997