FOR IMMEDIATE RELEASE
Contact: For Doubletree: For Promus:
William L. Perocchi, CFO John C. Hawkins, Corporate
Doubletree Corporation Communications
(602)220-6810 Promus Hotel Corporation
Ruth Pachman/Michael Freitag (901)374-5529
Kekst and Company Gregg A. Swearingen, Investor
(212)521-4800 Relations
Promus Hotel Corporation
(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
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 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 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.
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)
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
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
DOUBLETREE AND PROMUS MERGER
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
------ -------
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
------ -------
TOTAL 1,136 171,653
OTHER INFORMATION
Form of Transaction Merger of equals, stock-for-stock exchange
Subject to Approval of Promus and Doubletree hareholders;
approximately 40% of Doubletree shareholders
have agreed to vote in favor of the merger
Hart-Scott-Rodino review
Expected Closing By year-end 1997