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SCHEDULE 14A
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INFORMATION REQUIRED IN PROXY STATEMENT
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/X/ Soliciting Material Pursuant to Section 240.14a-12
LA QUINTA CORPORATION
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(Name of Registrant as Specified In Its Charter)
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and 0-11.
(1) Title of each class of securities to which transaction applies:
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On October 16, 2001, La Quinta Corporation, jointly with La Quinta
Properties, Inc., issued the following press release:
[LA QUINTA LOGO]
PRESS RELEASE
Contact: Temple Weiss
Investor Relations
877-777-6560
LA QUINTA ANNOUNCES NEW CORPORATE STRUCTURE
BOARDS OF DIRECTORS APPROVE SHARE REPURCHASE PROGRAM
Dallas, Texas - October 16, 2001 - The La Quinta Companies ("La Quinta" or "the
Companies") (NYSE: LQI) announced today that the Boards of Directors of La
Quinta Properties, Inc. and La Quinta Corporation have unanimously approved,
subject to shareholder approval, a new corporate structure for the two companies
under which La Quinta Properties, Inc. ("the REIT") will become a subsidiary of
La Quinta Corporation ("the Corporation"). The restructuring will be transparent
to shareholders, who will exchange current securities for new securities.
Shareholders' overall interests in the Companies will not change. The
restructuring is intended to benefit La Quinta Properties' REIT status and to
provide a suitable platform for future growth.
The La Quinta Companies also announced the authorization of up to $20 million in
periodic open market and privately negotiated share repurchases of La Quinta
equity securities.
NEW CORPORATE STRUCTURE
After careful review and on the advice of its advisors, La Quinta has elected to
forego its "grandfathered" paired share REIT status and convert to a
C-Corporation with a REIT subsidiary. Federal tax legislation adopted over the
past several years has severely restricted the activities of "grandfathered"
paired share REITs, limiting La Quinta's ability to grow its lodging business
through the construction of additional lodging properties, the franchising of
the La Quinta(R) brand and the acquisition of other lodging properties and
brands. In addition, without restructuring, the Companies will be unable to
continue to qualify as a REIT in the future. With the sale of healthcare assets
and the generation of hotel royalty fees, La Quinta's non-qualified REIT income
would eventually exceed the limits allowed for REITs. This would result in a
loss of REIT status, which would likely occur within the next 12 to 18 months.
The Companies will reorganize to avoid the restrictions that the "grandfathered"
paired share REIT structure imposes and to allow La Quinta Properties to
continue to qualify as a REIT. The new corporate structure will be achieved
through a tax-free merger in which the REIT will become a subsidiary of the
Corporation. The proposed transaction is the result of La Quinta's review of its
financial, legal and tax structure. In the restructuring, the following will
occur:
o The REIT's common stock will be converted (on a one-for-one basis)
into newly-created, non-voting Class B common stock, which will be
owned directly by shareholders;
o The REIT will issue a newly-created, voting Class A common stock,
which will be owned entirely by the Corporation; and,
o The Corporation's common stock will continue to be owned directly by
its shareholders. However, the Corporation's common stock will now be
paired with the REIT's new Class B common stock, similar to the
pairing arrangement with the REIT's current common stock.
After the restructuring, shareholders will continue to own interests in both La
Quinta Properties and La Quinta Corporation. Shareholders' interests in the
overall value of the Companies will remain unchanged, but the principal value
will be in the stock of the Corporation rather than the REIT after the
restructuring.
The Companies have structured this transaction to maintain La Quinta Properties'
tax-efficient REIT status while eliminating the restrictions imposed on the
"grandfathered" paired share structure. By issuing the Class B shares, the
Companies will be able to meet minimum ownership requirements to continue
qualifying as a REIT. Furthermore, the Class B shares permit shareholders to
continue to have a direct equity interest in the REIT after the restructuring
and to receive dividends distributed by the REIT in the future as more fully
described below. Shareholders' overall tax basis will not change as a result of
the transaction.
After restructuring, La Quinta will no longer be subject to the "grandfathered"
paired share restrictions and may pursue its growth initiatives while
maintaining REIT status for La Quinta Properties. Furthermore, in connection
with the restructuring, a portion of the REIT's interests in the La Quinta(R)
brand will be acquired tax-free by the Corporation, reducing the amount of
non-qualified income attributed to the REIT that otherwise would result in loss
of REIT status.
Francis W. ("Butch") Cash, President and Chief Executive Officer, said, "Today's
lodging environment is extremely challenging. Industry RevPAR for the third
quarter is expected to decline between 10% and 15%. La Quinta's third quarter
RevPAR declined approximately 8%, and we currently expect lodging EBITDA to
decline between 8% and 12%. While current industry conditions are difficult, we
must not only focus on today but also on the future in making decisions that
impact the Companies."
"This restructuring is about our future," continued Mr. Cash. "We have taken a
very deliberate approach in evaluating our current structure and various
alternatives. We believe the limitations of the existing structure restrict us
from making good, long-term value-enhancing business decisions. The new
structure resolves the limitations of the "grandfathered" paired share structure
in a proactive manner, allowing us to keep our real estate in the REIT vehicle,
grow the Companies, and increase shareholder value."
"Our greatest assets as a company lie, not only in the physical real estate, but
in our people and the value of the La Quinta(R) brand," said Mr. Cash. "This new
structure will allow us to unlock the value of those assets. Our long-term
strategy is to grow our lodging business through franchising, management
contracts, new development, and acquisitions. This new structure gives us the
platform on which to execute that strategy."
The new corporate structure will allow La Quinta to capture a number of
benefits, including its ability to:
o Own, operate and brand newly acquired hotels;
o Expand its lodging franchising program;
o Pay dividends directly to shareholders on a tax-efficient basis;
o Maintain the tax deductibility of the preferred dividends;
o Maximize the value of its existing net operating loss carry-forwards
("NOLs"); and
o Continue to align shareholder interest in ownership and management of
its real estate holdings.
In connection with the restructuring, La Quinta will take a special non-cash
charge totaling approximately $400 million. This non-recurring charge will
consist of approximately $230 million in deferred tax liabilities and $170
million of intangible write-offs. In addition, La Quinta will reclassify $200
million of preferred equity to minority interest.
The restructuring does not alter the terms or conditions of the Companies'
preferred stock or debt obligations. The Companies' preferred stock dividends
will continue to be paid by the REIT. The
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Companies' notes payable and other corporate debt will continue to be held by
the REIT. The REIT and the Corporation will continue to be obligors of the
Companies' bank credit facility. Because the restructuring does not impact the
Companies' debt securities, it is only subject to shareholder approval. The
Companies expect to present the restructuring to shareholders for their approval
in early 2002.
Commenting on the proposed restructuring, Clive D. Bode, Chairman of the Boards
and special advisor to certain members of the Bass Family of Fort Worth, Texas,
said, "The restructuring resolves the problems La Quinta faced in maintaining
its paired share REIT structure. Furthermore, it positions La Quinta to take
advantage of future growth opportunities that will exist in its lodging business
and help create value. It is our intention to vote our shares, which represent
nearly ten percent ownership in La Quinta, in favor of the transaction."
DIVIDEND POLICY
The Companies do not expect to pay dividends on the REIT Class B common stock
until after the Companies' NOLs have been utilized. The REIT and the Corporation
have combined NOLs of approximately $250 million. Holders of the Class B common
stock will be entitled to a preferential dividend, if common stock dividends are
declared, of approximately $15 million (or $0.10 per share) per year, payable
quarterly beginning in 2005.
SHARE REPURCHASE PROGRAM
The Boards of Directors have also approved a share repurchase program,
authorizing the Companies to repurchase up to $20 million dollars of the
Companies' equity securities. The program is designed to allow the Companies to
take advantage of opportunities that exist from time to time to purchase the
Companies' common and preferred stock at attractive prices in the open market
and privately negotiated transactions.
David L. Rea, Executive Vice President, Chief Financial Officer and Treasurer,
stated, "We sold approximately $95 million of healthcare assets during the third
quarter, reducing our net debt to approximately $950 million at the end of the
quarter. Given our success at improving our balance sheet and strengthening our
business, we believe our stock represents an attractive investment opportunity.
Our share repurchase program will allow us to further enhance shareholder value.
With cash-on-hand of approximately $140 million at September 30, 2001 and no
current borrowings under the Companies' $225 million revolving line of credit,
we have the capacity to commence a share buyback, pay 2001 and 2002 debt
maturities of $92 million, and deploy capital for future growth."
CONFERENCE CALL AND WHERE YOU CAN FIND ADDITIONAL INFORMATION
The Companies will hold a conference call at 11:00AM (EST) on October 16, 2001
to discuss the new corporate structure and related items. Some of the Companies'
responses to questions which may be asked on this conference call, as well as
other matters that may be discussed during this conference call, may contain or
constitute information that has not previously been disclosed. The conference
call can be accessed by dialing 800-218-4007 (International: 303-262-2075). An
access code is not required. Simultaneous with the conference call, an audio
webcast of the call will be available via a link on the La Quinta website,
www.laquinta.com, in the Investor Relations--Audio/Webcasts section. A replay of
the call will be available at the same Internet address or by dialing
800-405-2236 (International: 303-590-3000) and entering the access code of
406141. The replay will be available from 1:00PM (EST) on October 16, 2001
through 1:00PM (EST) on October 23, 2001.
The Companies have established a toll-free number (877-777-6560) for investors
to call and request copies of public filings and press releases. In addition,
investors can call this toll-free number and reach our
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Investor Relations Department to ask questions and the Companies will respond to
investor inquiries based on publicly available information.
The Companies have also established a special page dedicated to the
restructuring on the La Quinta website, www.laquinta.com, in the Investor
Relations section. Investors can access documents related to the restructuring,
including an investor presentation, as well as other information about La
Quinta, at this site as those documents become available.
ABOUT THE LA QUINTA COMPANIES
The La Quinta Companies (NYSE: LQI), headquartered in Dallas, Texas, consist of
La Quinta Properties, Inc., a real estate investment trust, and La Quinta
Corporation. La Quinta owns, operates or franchises over 300 La Quinta(R) Inns
and La Quinta(R) Inn & Suites in 30 states. The Companies' real estate holdings
also include assisted living and other healthcare facilities. Today's news
release, as well as other information about La Quinta, is available on the
Internet at www.laquinta.com.
CERTAIN MATTERS DISCUSSED HEREIN MAY CONSTITUTE "FORWARD-LOOKING STATEMENTS"
WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. THE
LA QUINTA COMPANIES (THE "COMPANIES"), CONSISTING OF LA QUINTA PROPERTIES, INC.
("REALTY") AND LA QUINTA CORPORATION ("OPERATING"), INTEND SUCH FORWARD-LOOKING
STATEMENTS TO BE COVERED BY THE SAFE HARBOR PROVISIONS FOR FORWARD-LOOKING
STATEMENTS, AND ARE INCLUDING THIS STATEMENT FOR PURPOSES OF COMPLYING WITH
THESE SAFE HARBOR PROVISIONS. ALTHOUGH THE COMPANIES BELIEVE THE FORWARD-LOOKING
STATEMENTS ARE BASED ON REASONABLE ASSUMPTIONS, THE COMPANIES CAN GIVE NO
ASSURANCE THAT THEIR EXPECTATIONS WILL BE ATTAINED. ACTUAL RESULTS AND THE
TIMING OF CERTAIN EVENTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN OR
CONTEMPLATED BY THE FORWARD-LOOKING STATEMENTS DUE TO A NUMBER OF FACTORS,
INCLUDING, WITHOUT LIMITATION, THE SATISFACTION OF THE CONDITIONS TO CLOSING,
INCLUDING RECEIPT OF SHAREHOLDER AND REGULATORY APPROVAL, THE TAX-FREE NATURE OF
THE RESTRUCTURING, INCLUDING THE TRANSFER OF A PORTION OF THE ECONOMIC VALUE OF
THE LA QUINTA(R) BRAND TO LA QUINTA CORPORATION, THE EFFECT OF THE RECENT
TERRORIST ATTACKS ON THE COMPANIES' INDUSTRY AND ITS BUSINESS, GENERAL ECONOMIC
AND REAL ESTATE CONDITIONS, THE CYCLICALITY OF THE HOTEL BUSINESS, INCREASED
SUPPLY AND WEAK DEMAND WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY
FROM HISTORICAL RESULTS OR THOSE ANTICIPATED, INCREASES IN ENERGY COSTS AND
OTHER OPERATING COSTS RESULTING IN LOWER OPERATING MARGINS, THE GROWTH OF OUR
FRANCHISE PROGRAM, THE IDENTIFICATION OF SATISFACTORY PROSPECTIVE BUYERS FOR
HEALTHCARE RELATED ASSETS OF THE COMPANIES' AND THE AVAILABILITY OF FINANCING
FOR SUCH PROSPECTIVE BUYERS, THE AVAILABILITY OF FINANCING FOR THE COMPANIES'
CAPITAL INVESTMENT PROGRAM, INTEREST RATES, COMPETITION FOR HOTEL SERVICES AND
HEALTHCARE FACILITIES IN A GIVEN MARKET, COMPETITION IN FRANCHISING THE
COMPANIES' BRANDS, THE ULTIMATE OUTCOME OF CERTAIN LITIGATION FILED AGAINST THE
COMPANIES, THE ENACTMENT OF LEGISLATION FURTHER IMPACTING THE COMPANIES' STATUS
AS A PAIRED SHARE REAL ESTATE INVESTMENT TRUST ("REIT") OR REALTY'S STATUS AS A
REIT, THE CONTINUED ABILITY OF REALTY TO QUALIFY FOR TAXATION AS A REIT, THE
FURTHER IMPLEMENTATION OF REGULATIONS GOVERNING PAYMENTS TO, AS WELL AS THE
FINANCIAL CONDITIONS OF, OPERATORS OF REALTY'S HEALTHCARE RELATED ASSETS,
INCLUDING THE FILING FOR PROTECTION UNDER THE US BANKRUPTCY CODE BY ANY
OPERATORS OF THE COMPANIES HEALTHCARE ASSETS, THE IMPACT OF THE PROTECTION
OFFERED UNDER THE US BANKRUPTCY CODE FOR THOSE OPERATORS WHO HAVE ALREADY FILED
FOR SUCH PROTECTION, AND OTHER RISKS DETAILED FROM TIME TO TIME IN THE FILINGS
OF REALTY AND OPERATING WITH THE SECURITIES AND EXCHANGE COMMISSION ("SEC"),
INCLUDING, WITHOUT LIMITATION, THE RISKS DESCRIBED IN ITEM 7 OF THE JOINT ANNUAL
REPORT ON FORM 10-K ENTITLED "CERTAIN FACTORS YOU SHOULD CONSIDER." THE
COMPANIES DISCLAIM ANY INTENTION OR OBLIGATION TO UPDATE OR REVISE ANY
FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE
EVENTS OR OTHERWISE."
ADDITIONAL INFORMATION AND WHERE TO FIND IT
THIS MATERIAL IS NOT A SUBSTITUTE FOR THE JOINT PROXY STATEMENT LA QUINTA
CORPORATION AND LA QUINTA PROPERTIES, INC. WILL FILE, IN THE PROSPECTUS THAT LA
QUINTA PROPERTIES, INC. MAY FILE, WITH THE SECURITIES AND EXCHANGE COMMISSION.
INVESTORS ARE URGED TO READ THE JOINT PROXY STATEMENT AND, IF APPLICABLE, THE
PROSPECTUS, WHICH WILL CONTAIN IMPORTANT INFORMATION, INCLUDING DETAILED RISK
FACTORS, WHEN IT BECOMES AVAILABLE. THE JOINT PROXY STATEMENT AND OTHER
DOCUMENTS WHICH WILL BE FILED BY LA QUINTA CORPORATION AND LA QUINTA PROPERTIES,
INC. WITH THE SECURITIES AND EXCHANGE COMMISSION WILL BE AVAILABLE FREE OF
CHARGE AT THE SEC'S WEBSITE (www.sec.gov) OR BY DIRECTING A REQUEST WHEN SUCH A
FILING IS MADE TO LA QUINTA CORPORATION, 909 HIDDEN RIDGE, SUITE 600, IRVING,
TEXAS, ATTN: INVESTOR RELATIONS, TELEPHONE (877) 777-6560; OR BY DIRECTING A
REQUEST WHEN SUCH A FILING IS MADE TO LA QUINTA PROPERTIES, INC., 909 HIDDEN
RIDGE, SUITE 600, IRVING, TEXAS, ATTN: INVESTOR RELATIONS, TELEPHONE (877)
777-6560.
THE LA QUINTA COMPANIES, ITS DIRECTORS, AND CERTAIN OF ITS EXECUTIVE OFFICERS
MAY BE CONSIDERED PARTICIPANTS IN THE SOLICITATION OF PROXIES IN CONNECTION WITH
THE PROPOSED TRANSACTIONS. INFORMATION ABOUT THE DIRECTORS AND EXECUTIVE
OFFICERS OF LA QUINTA CORPORATION AND LA QUINTA PROPERTIES, INC. AND THEIR
OWNERSHIP OF LA QUINTA CORPORATION AND LA QUINTA PROPERTIES, INC. STOCK IS SET
FORTH IN THE PROXY STATEMENT FOR THE LA QUINTA COMPANIES' 2001 ANNUAL MEETING OF
SHAREHOLDERS. INVESTORS MAY OBTAIN ADDITIONAL INFORMATION REGARDING THE
INTERESTS OF SUCH PARTICIPANTS BY READING THE JOINT PROXY STATEMENT WHEN IT
BECOMES AVAILABLE.
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The following legends are required by Securities and Exchange Commission
(SEC) regulations to appear on all written communications relating to the
restructuring:
La Quinta Corporation, La Quinta Properties, Inc. and their directors
and certain of their executive officers may be deemed to be participants in
the solicitation of proxies from shareholders to approve the proposed
restructuring transaction. Investors may obtain information about La Quinta
Corporation, La Quinta Properties, Inc. and such directors and executive
officers of La Quinta Corporation and La Quinta Properties, Inc. and their
ownership of La Quinta Corporation and La Quinta Properties, Inc. common
stock by reading the joint proxy statement for The La Quinta Companies 2001
annual meeting of shareholders. Investors may obtain additional information
regarding the interests of such participants by reading the joint proxy
statement that will be filed, and the prospectus that may be filed, with the
SEC in connection with the restructuring transaction when such documents
become available.
This material is not a substitute for the joint proxy statement La
Quinta Corporation and La Quinta Properties, Inc. will file, in the
prospectus that La Quinta Properties, Inc. may file, with the Securities and
Exchange Commission. INVESTORS ARE URGED TO READ THE JOINT PROXY STATEMENT
AND, IF APPLICABLE, PROSPECTUS AND OTHER RELEVANT DOCUMENTS TO BE FILED WITH
THE SEC REGARDING THE RESTRUCTURING WHEN THEY BECOME AVAILABLE BECAUSE THEY
WILL CONTAIN IMPORTANT INFORMATION. Investors may obtain a free copy of the
joint proxy statement and, if applicable, prospectus and other documents
filed with the SEC at the SEC's website at www.sec.gov. The joint proxy
statement and, if applicable, prospectus and these other documents may also
be obtained for free from La Quinta Corporation by directing a request to La
Quinta Corporation, 909 Hidden Ridge, Suite 600, Irving, Texas, Attn:
Investor Relations, telephone (877) 777-6560.