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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED)
JANUARY 3, 1998
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LA QUINTA INNS, INC.
(Exact name of registrant as specified in its charter)
TEXAS 1-7790 74-1724417
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation or organization) Identification
Number)
WESTON CENTRE
112 E. PECAN STREET
P.O. BOX 2636
SAN ANTONIO, TEXAS 78299-2636
(Address of principal executive offices)
(210) 302-6000
(Registrant's telephone number)
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ITEM 5. OTHER EVENTS
On January 3, 1998, La Quinta Inns, Inc. (the "Company"), Meditrust
Corporation ("Meditrust REIT") and Meditrust Operating Company ("Meditrust
Operating Company" and together with Meditrust REIT, the "Meditrust Companies")
entered into an agreement and plan of merger (the "Merger Agreement"), pursuant
to which the Company will merge with and into Meditrust REIT with Meditrust
REIT being the surviving corporation (the "Merger"). As a result of the
Merger, Meditrust REIT will acquire all of the assets and liabilities of the
Company and Meditrust REIT will assume approximately $900 million of the
Company's existing indebtedness.
Under the terms of the Merger Agreement, shareholders of the Company
will have the option to elect to receive, subject to the amount of aggregate
cash payable to Company shareholders being limited to approximately $521
million (representing approximately 24% to 28% of the total merger
consideration depending on the Meeting Date Price described below), either (i)
a combination of common stock of the Meditrust Companies (the "Paired Shares")
and the earnings and profit distribution referred to below, or (ii) cash. The
stock consideration will be payable in Paired Shares under an exchange ratio
determined based on the average closing price of the Paired Shares for 20
randomly determined trading days in a 30-day period ending the seventh day
prior to the Company's shareholder meeting called to consider the Merger (the
"Meeting Date Price").
The Merger Agreement provides that Company shareholders electing to
receive stock consideration will receive Paired Shares in an amount, based on
the Meeting Date Price, equal to the difference between $26.00 and the earnings
and profit distribution to be received per Company share, so long as the
Meeting Date Price is between $34.20 and $41.80. Company shareholders electing
to receive stock consideration will also receive the earnings and profit
distribution so long as they hold the Paired Shares on the applicable record
date. The earnings and profit distribution is expected to be declared
immediately prior to the Merger, payable to all shareholders of record of the
Meditrust Companies on a date to be determined by Meditrust between the
fifteenth and the forty-fifth day following the Merger and payable within
fifteen days of such record date.
If the Meeting Date Price is greater than or equal to $41.80 but less
than or equal to $45.60, the exchange ratio for each share of Company common
stock exchanged into Paired Shares will be 0.6220, reduced by the consideration
to be received in the earnings and profit distribution per Company share
(resulting in total consideration based on the Meeting Date Price ranging from
$26.00 to $28.36 per share of Company common stock, including the earnings and
profit distribution, as the Meeting Date Price increases through this range).
If the Meeting Date Price is greater than $45.60, then each Company share will
be entitled to received $28.36 in total consideration based on the Meeting Date
Price, comprised of Paired Shares and the earnings and profit distribution
referred to above.
If the Meeting Date Price is less than $34.20 but greater than or
equal to $30.40, the exchange ratio for each share of Company common stock
exchanged into Paired Shares will
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be 0.7602, reduced by the amount to be received in the earnings and profit
distribution per Company share (resulting in total consideration based on the
Meeting Date Price ranging from $26.00 to $23.11 per share of Company common
stock, including the earnings and profit distribution, as the Meeting Date
Price decreases through this range). If the Meeting Date Price is below
$30.40, the Company will have the right to terminate the Merger Agreement under
certain circumstances, subject to a "top-up" right exercisable by Meditrust
REIT which is designed to return total consideration per Company share based on
the Meeting Date Price to at least $23.11, inclusive of the earnings and profit
distribution. If the Meeting Date Price is below $28.50, the Company will have
the unilateral right to terminate the Merger Agreement. On January 7, 1998,
the closing price of the Paired Shares was $34.6875.
All Company shareholders will have the right to elect cash
consideration for each of their shares of Company common stock. The Merger
Agreement provides that Company shareholders electing to receive cash will
receive, subject to the maximum cash limitations, $26.00 per exchanged share of
Company common stock. In the event that the amount to be paid both pursuant to
cash elections in the Merger and in the earnings and profit distribution paid
with respect to Paired Shares received by former Company shareholders in the
Merger exceeds approximately $521 million, the cash merger consideration will
be distributed pro rata among those shares submitted for cash and all other
Company shares will receive Paired Shares and the distribution. The maximum
cash limitation of approximately $521 million (which includes the cash merger
consideration and the earnings and profit distribution received by former
Company shareholders) is not subject to adjustment based on the Meeting Date
Price.
The Merger is subject to various conditions including, without
limitation, approval of the Merger by two-thirds of the outstanding shares of
the Company common stock, by a majority of the outstanding shares of each of
the Meditrust Companies, and regulatory agencies. Subject to the terms of a
shareholders agreement, Gary L. Mead, Thomas M. Taylor & Co. and entities and
individuals associated with certain members of the Bass family have agreed with
the Meditrust Companies to vote approximately 28% of the outstanding shares of
the Company common stock in favor of the Merger. These shareholders have also
agreed to select cash consideration for all of their shares of Company common
stock. It is currently anticipated that the Merger will be consummated in the
second quarter of 1998. In addition to the foregoing, the Meditrust Companies
are reviewing the possibility of providing its shareholders (including former
Company shareholders who hold Paired Shares on the record date for the earnings
and profit distribution) with an election to receive either cash or additional
Paired Shares in exchange for their share of the earnings and profit
distribution, in lieu of solely a cash distribution.
The table set forth below indicates, based on (a) an assumed aggregate
earnings and profit distribution to all Meditrust REIT shareholders in an
amount equal to $325 million (see below), and (b) an assumption that the number
of Company shares and Paired Shares outstanding on the date hereof remains
constant through the record date of the earnings and profit distribution, and
(c) assuming that maximum cash elections are made in the Merger, at various
illustrative Meeting Date Prices: (i) the "Adjusted E&P Distribution" that
would be payable to a holder of one share of Company common stock who holds the
Paired Shares received in the Merger through the record date of the earnings
and profit distribution, (ii) the "Exchange Ratio," which is the number of
Paired Shares
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which each Company share electing stock (and those electing cash but not
eligible to receive cash as a result of the "Maximum Cash Shares" limitation)
consideration will be converted into, (iii) the "Stock Consideration," which is
the number of Paired Shares to be received upon conversion of one share of
Company common stock, times the Meeting Date Price, (iv) the Adjusted E&P
Distribution plus the Stock Consideration, and (v) the "Maximum Cash Shares"
which is the maximum number of shares of Company common stock which may elect
to receive the $26.00 cash merger consideration.
All of the assumptions relied upon in creating the table set forth
below are being used solely for illustrative purposes. No assurances can be
given that all or any of these assumptions will prove to be accurate at or
prior to the closing of the Merger. There is a high degree of uncertainty
associated with each assumption. For example, it was assumed in creating the
table that the earnings and profit distribution will equal $325 million in
aggregate value. This assumption is based solely on Section 3.01(o)(vi) of the
Merger Agreement in which the Company represents that it "estimates that as of
September 30, 1997 the accumulated and current earnings and profit ("E&P") [of
La Quinta] (as determined for federal income tax purposes) was not in excess of
$325 million." There are a number of factors that could both reduce or
increase this estimate between the representation date of September 30, 1997
and the time at which the Meditrust Companies announce the actual earnings and
profit distribution. These factors include, without limitation, earnings and
profit generated by the operations of the Company between the representation
date and the Merger (which would increase the number); the cash settlement of
employee stock options and other compensation expenses provided for in the
Merger Agreement (which would decrease the number); and the possible sale of
certain assets by the Company prior to the Merger pursuant to Section 5.15 of
the Merger Agreement (which would increase the number). Other adjustments may
also occur prior to the Merger which cannot be contemplated at this time. In
addition, accountants for the Company and the Meditrust Companies are currently
reviewing calculations of the Company's accumulated and current earnings and
profit for tax purposes and no assurances can be given that this historical
analysis will not result in further adjustments. Accordingly, it is essential
that investors not rely on any given assumption prior to the time at which
results are actually determined and announced including, without limitation,
the assumption regarding the value of the earnings and profit distribution of
$325 million. Finally, it should be noted that it is currently the intention
of the Meditrust Companies and the Company to minimize the amount of the
earnings and profit distribution.
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STOCK
MEETING ADJUSTED CONSIDERATION (2) MAXIMUM
DATE E&P EXCHANGE STOCK PLUS ADJUSTED CASH
PRICE DISTRIBUTION(1) RATIO CONSIDERATION(2) E&P DISTRIBUTION SHARES(3)
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$45.60 $1.53 0.5884 $26.83 $28.36 16,445,910
$41.80 $1.53 0.5854 $24.47 $26.00 16,459,164
$38.00 $1.63 0.6414 $24.37 $26.00 16,211,332
$34.20 $1.74 0.7093 $24.26 $26.00 15,926,487
$30.40 $1.73 0.7032 $21.38 $23.11 15,951,262
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(1) Based on an assumed accumulated and current earnings and profit of the
Company of $325 million, which amount is being used solely for
illustrative purposes.
(2) Stock Consideration is stated based on the applicable Meeting Date
Price.
(3) Maximum number of Company shares entitled to receive $26.00 in cash
merger consideration.
A copy of the Joint Press Release of Meditrust REIT and the
Company dated January 4, 1998 is attached hereto as Exhibit 99.1 and is
incorporated herein by reference.
The foregoing summary of certain provisions of the Merger
Agreement and related documents in qualified in its entirety by reference to
such documents, which are attached hereto as Exhibits 2.1, 10.1 and 10.2 and
are incorporated herein by reference.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) The following exhibits are filed as part of this Report:
Exhibit
Number Description
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2.1 Agreement and Plan of Merger, dated as of January 3, 1998 by and among La Quinta Inns, Inc.,
Meditrust Corporation and Meditrust Operating Company.
10.1 Shareholders Agreement, dated as of January 3, 1998 by and among La Quinta Inns, Inc.,
Meditrust Corporation, Meditrust Operating Company and the shareholders of La Quinta Inns, Inc.
named on the signature pages thereto.
10.2 Registration Rights Agreement, dated as of January 3, 1998 by and among La Quinta Inns, Inc.,
Meditrust Corporation, Meditrust Operating Company and the shareholders of La Quinta Inns, Inc.
named on the signature pages thereto.
99.1 Press release dated January 4, 1998 announcing the execution of the Merger Agreement between
La Quinta Inns, Inc., Meditrust Corporation and Meditrust Operating Company.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
LA QUINTA INNS, INC.
By: /s/ GARY L. MEAD
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Gary L. Mead
President and
Chief Executive Officer
Date: January 8, 1998
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EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION PAGE
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* 2.1 Agreement and Plan of Merger, dated as of January 2, 1998 by and among La Quinta Inns, Inc., Meditrust
Corporation and Meditrust Operating Company.
* 10.1 Shareholders Agreement, dated as of January 3, 1998 by and among La Quinta Inns, Inc., Meditrust
Corporation, Meditrust Operating Company and the shareholders of La Quinta Inns, Inc. named on the
signature pages thereto.
* 10.2 Registration Rights Agreement, dated as of January 3, 1998 by and among La Quinta Inns, Inc., Meditrust
Corporation, Meditrust Operating Company and the shareholders of La Quinta Inns, Inc. named on the
signature pages thereto.
* 99.1 Press release dated January 4, 1998 announcing the execution of the Merger Agreement between La Quinta
Inns, Inc., Meditrust Corporation and Meditrust Operating Company.
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* Filed herewith.
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