EXHIBIT 99.1
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FOR IMMEDIATE RELEASE
MERISTAR HOTELS & RESORTS CONTACTS: INTERSTATE HOTELS CORPORATION CONTACTS:
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Melissa Thompson Tom Loftus Lisa O'Connor
Director of Corporate Communications Media Inquiries Investor Relations
(202) 295-2228 (412) 937-3382 (412) 937-3319
Jerry Daly or Carol McCune Mike Pascale or Rhonda Barnat
Daly Gray Public Relations (Media) Abernathy MacGregor Group (Media)
(703) 435-6293 (212) 371-5999
MERISTAR HOTELS & RESORTS TO MERGE WITH INTERSTATE HOTELS
NEW COMPANY WILL OPERATE MORE THAN 400 HOTELS WITH OVER 86,000 ROOMS
WASHINGTON, D.C., AND PITTSBURGH, May 2, 2002--MeriStar Hotels &
Resorts (NYSE: MMH) and Interstate Hotels Corporation (Nasdaq: IHCO), the
nation's two largest independent hotel management companies, today announced
that they have signed a definitive agreement to merge.
The combined company will be the premier independent hotel operator in
the world, operating more than 86,000 rooms in 412 hotels, representing over 30
franchise brands in North America and Europe.
The combined company will possess expansive operational and financial
resources enabling it to provide state-of-the-art services to hotel owners. The
combined company, to be named Interstate Hotels Corporation, will include
BridgeStreet Corporate Housing Worldwide and Doral Resorts & Conference Centers.
It will have estimated 2002 pro forma revenues of $340 million, and estimated
pro forma EBITDA of $33 million to $35 million. The transaction is valued at
approximately $68 million based on MeriStar's closing stock price of $1.21 on
May 1, resulting in a total market capitalization of $260 million for the
combined company.
The combined company will be headquartered in Washington, D.C. while
maintaining a significant operating presence in Pittsburgh. Paul W. Whetsell,
MeriStar chairman and chief
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executive officer, and John Emery, president and chief operating officer, will
continue in those roles for the merged company. Interstate's Chairman and Chief
Executive Officer Thomas F. Hewitt will serve on the combined company's board of
directors. The combined company's board of directors initially will include six
members nominated by MeriStar and seven members nominated by Interstate, of
which five initially will be representatives from Interstate's Investor Group.
"The merger will create an independent hotel management company with a
portfolio of more than 400 properties in the United States, Canada and Russia,
which will allow us to achieve significant economies of scale," said Whetsell.
"We expect synergistic corporate savings of between $8 million and $10 million
on an annualized basis. The merger will be accretive to stockholders in 2002."
Commenting on the merger, Hewitt said, "Since our spin-off from Wyndham
International, we have been committed to strengthening the financial structure
of our organization and strategically growing the company. We have
overwhelmingly concluded that this transaction is in the best interests of our
stockholders. We believe the combined company will offer stockholders of both
companies a strong platform for future growth.
"In addition, we will be a stronger, more efficient operator, allowing
us to generate higher returns for our owners and, as a result, higher management
fees for the new company than we could have achieved operating separately,"
Hewitt said. "Both companies' properties are complementary, and Interstate's
presence in Eastern Europe, combined with MeriStar's BridgeStreet Corporate
Housing Worldwide division's experience in Western Europe, creates additional
growth avenues."
"Both Interstate and MeriStar have a highly focused emphasis on
customer service and generating the highest possible returns for their owners,"
Whetsell said. "Our initial internal
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mission will be to meld our highly similar operating philosophies into one
common culture and focus on associate retention. We expect the transaction to be
virtually seamless to employees at our hotels."
TRANSACTION HIGHLIGHTS
In the tax-free, stock-for-stock merger of Interstate into MeriStar,
Interstate stockholders will receive 4.6 shares of the surviving company's
common stock for each share of the 12.2 million shares of Interstate common
stock outstanding and each of the 39.4 million existing shares of MeriStar
common stock and operating partnership units will remain outstanding. All
Interstate stock options will be converted into options to purchase shares of
the combined company.
The consummation of the merger is subject to various conditions,
including U.S. antitrust clearance and the respective approvals of the
stockholders of Interstate and MeriStar. The stockholders meetings and the
closing are expected to occur in the third quarter of 2002. MeriStar or
Interstate may each receive from the other a termination fee of $2 million plus
up to $500,000 in expenses if the merger agreement is terminated by the other
party under various circumstances.
In connection with the transaction, Interstate's Investor Group will
convert its Interstate convertible debt and preferred equity into shares of
common stock of the combined company and receive a payment of $9.25 million. The
Investor Group and Interstate senior management have committed to vote in favor
of the merger their Class A common stock, which will constitute approximately 57
percent of Interstate's common stock expected to be outstanding at the time of
the Interstate stockholders meeting. Oak Hill Capital Partners and its
affiliates and MeriStar management, which collectively own 22 percent of
MeriStar common stock, have agreed to vote their shares in favor of the merger.
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The respective boards of directors approved the transaction yesterday.
The Interstate board action was based in part upon the recommendation of its
Special Committee of independent directors. Each board received a fairness
opinion from its respective financial advisor. Salomon Smith Barney advised
MeriStar in the transaction and Merrill Lynch advised Interstate.
GROWTH STRATEGIES AND TRANSACTION BENEFITS
"Due to economies of scale, a larger customer base, and an improved
capital structure, the merged company will have expanded avenues of growth,"
Emery said. "The new company will have a real estate joint venture in place to
acquire $300 million to $500 million of hotel assets, and up to $50 million of
cash and availability on its line of credit to participate in joint ventures."
The hotel management business unit will use its expanded resources to
provide current and prospective owners with a wide array of improved services
and benefits, including Internet-based business information systems providing
real-time data for better yield management and cost control; broader electronic
and direct sales resources, including more than 2,000 sales professionals;
increased cost efficiency through national purchasing; and capital for
co-investments and joint ventures.
BridgeStreet's growth will be gained through expansion of its national
client base and European operations, as well as its recently established
licensing program for North American markets.
Doral Resorts & Conference Centers will grow through new management
contracts that leverage the strength of the Doral name and a central
reservations system.
CAPITAL STRUCTURE
A new $113 million senior credit facility will replace the existing
revolving credit
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facilities of both companies. The facility, for which credit commitments have
been received, will have a three-year term loan and a three-year revolver with a
one-year option to extend. The interest rate on the facility will range from
LIBOR + 300 basis points to LIBOR + 450 basis points, based on certain financial
covenant levels. Total debt outstanding, net of cash, is expected to be $135
million at closing. Emery commented, "The merger significantly improves our
capital structure due to the conversion of Interstate's $25 million of
convertible notes and $7.25 million of convertible preferred stock into shares
of common stock of the combined company prior to closing."
Upon completion of the merger, the combined company is expected to have
approximately 105 million common shares and operating partnership units
outstanding.
CONFERENCE CALL
MeriStar and Interstate will hold a joint conference call at 2 p.m. ET
today to discuss in greater detail the merger of the two companies. The
conference call will feature Paul W. Whetsell, chairman and chief executive
officer, MeriStar Hotels & Resorts; Thomas F. Hewitt, chairman and chief
executive officer of Interstate Hotels; and John Emery, president and chief
operating officer of MeriStar Hotels & Resorts. A simultaneous webcast of the
conference call will be available at MeriStar's Web site, www.meristar.com, and
at www.streetevents.com.
ABOUT THE NEW COMPANY
The new company will combine MeriStar's 277 managed hotels with
Interstate's 135 properties, giving it more than twice those of its nearest
competitor in terms of properties and three times the size in number of rooms.
The combined company will be the largest independent operator of full-service
Marriott, Hilton and Sheraton hotels, operating properties in 45 states, the
District of Columbia, Canada and Russia.
The company also will include MeriStar's BridgeStreet Corporate Housing
Worldwide
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division with more than 3,300 units in the United States, Canada and Europe.
ABOUT INTERSTATE
Interstate Hotels Corporation operates 135 hotels with more than 28,000
rooms in 36 states, the District of Columbia, Canada and Russia. For more
information, visit www.interstatehotels.com.
ABOUT MERISTAR
MeriStar Hotels & Resorts operates 277 hospitality properties with
more than 58,000 rooms in 42 states, the District of Columbia, and Canada,
including 54 properties managed by Flagstone Hospitality Management, a
subsidiary of MeriStar Hotels & Resorts. BridgeStreet Corporate Housing
Worldwide, a MeriStar subsidiary, is one of the world's largest corporate
housing providers, offering upscale, fully furnished corporate housing
throughout the United States, Canada, the United Kingdom, France and 35
additional countries through its network partners. For more information about
MeriStar, visit the company's Web site: www.meristar.com.
THIS PRESS RELEASE CONTAINS "FORWARD-LOOKING STATEMENTS," WITHIN THE
MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, ABOUT THE
COMPANIES, INCLUDING THOSE STATEMENTS REGARDING FUTURE OPERATING RESULTS AND THE
TIMING AND COMPOSITION OF REVENUES, AMONG OTHERS, AND STATEMENTS CONTAINING
WORDS SUCH AS "EXPECTS," "BELIEVES" OR "WILL," WHICH INDICATE THAT THOSE
STATEMENTS ARE FORWARD-LOOKING. EXCEPT FOR HISTORICAL INFORMATION, THE MATTERS
DISCUSSED IN THIS PRESS RELEASE ARE FORWARD-LOOKING STATEMENTS THAT ARE SUBJECT
TO CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE THE ACTUAL RESULTS TO DIFFER
MATERIALLY, INCLUDING THE CURRENT SLOWDOWN OF THE NATIONAL ECONOMY, ECONOMIC
CONDITIONS GENERALLY AND THE REAL ESTATE MARKET SPECIFICALLY, THE IMPACT OF THE
EVENTS OF SEPTEMBER 11, 2001, LEGISLATIVE AND REGULATORY CHANGES, AVAILABILITY
OF DEBT AND EQUITY CAPITAL, INTEREST RATES, COMPETITION, SUPPLY AND DEMAND FOR
LODGING FACILITIES IN OUR CURRENT AND PROPOSED MARKET AREAS AND THE POTENTIAL
DE-LISTING OF MERISTAR HOTELS & RESORTS BY THE NYSE. ADDITIONAL RISKS ARE
DISCUSSED IN THE COMPANIES' FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION,
INCLUDING THE COMPANIES' ANNUAL REPORTS ON FORM 10-K FOR THE YEAR ENDED DECEMBER
31, 2001.
THIS PRESS RELEASE SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES NOR SHALL THERE BE ANY SALE OF
ANY SECURITIES IN ANY STATE OR PROVINCE IN WHICH SUCH OFFER, SOLICITATION OR
SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER APPLICABLE
SECURITIES LAWS. MERISTAR PLANS TO FILE A REGISTRATION STATEMENT ON FORM S-4
WITH THE SEC IN CONNECTION WITH THE MERGER TRANSACTION. THE FORM S-4 WILL
CONTAIN A PROSPECTUS, A PROXY
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STATEMENT, AND OTHER DOCUMENTS FOR THE STOCKHOLDERS' MEETINGS OF MERISTAR AND
INTERSTATE AT WHICH TIME THE PROPOSED TRANSACTION WILL BE CONSIDERED. MERISTAR
AND INTERSTATE PLAN TO MAIL THE PROXY STATEMENT AND PROSPECTUS CONTAINED IN THE
FORM S-4 TO THEIR RESPECTIVE STOCKHOLDERS. THE FORM S-4, PROXY STATEMENT AND
PROSPECTUS WILL CONTAIN IMPORTANT INFORMATION ABOUT MERISTAR, INTERSTATE, THE
MERGER AND RELATED MATTERS. INVESTORS AND STOCKHOLDERS SHOULD READ THE FORM S-4,
PROXY STATEMENT AND PROSPECTUS AND THE OTHER DOCUMENTS FILED WITH THE SEC IN
CONNECTION WITH THE MERGER CAREFULLY BEFORE THEY MAKE ANY DECISION WITH RESPECT
TO THE MERGER. A COPY OF THE MERGER AGREEMENT WILL BE FILED WITH THE SEC BY BOTH
MERISTAR AND INTERSTATE. THE FORM S-4, PROXY STATEMENT AND PROSPECTUS, AND ALL
OTHER DOCUMENTS FILED WITH THE SEC IN CONNECTION WITH THE MERGER TRANSACTION
WILL BE AVAILABLE WHEN FILED FREE OF CHARGE AT THE SEC'S WEB SITE, AT
WWW.SEC.GOV. IN ADDITION, THE PROXY STATEMENT AND PROSPECTUS, AND ALL OTHER
DOCUMENTS FILED WITH THE SEC IN CONNECTION WITH THE MERGER WILL BE MADE
AVAILABLE TO INVESTORS FREE OF CHARGE BY WRITING TO THE MERISTAR AND INTERSTATE
CONTACT ADDRESSES SET FORTH IN THIS PRESS RELEASE.
IN ADDITION TO THE FORM S-4, THE PROXY STATEMENT, AND THE OTHER
DOCUMENTS FILED WITH THE SEC IN CONNECTION WITH THE MERGER, BOTH MERISTAR AND
INTERSTATE ARE OBLIGATED TO FILE ANNUAL, QUARTERLY AND SPECIAL REPORTS, PROXY
STATEMENTS AND OTHER INFORMATION WITH THE SEC. YOU MAY READ AND COPY ANY
REPORTS, STATEMENTS AND OTHER INFORMATION FILED WITH THE SEC AT THE SEC'S PUBLIC
REFERENCE ROOM AT 450 FIFTH STREET, N.W., WASHINGTON, D.C. 20549. PLEASE CALL
THE SEC AT 1-800-SEC-0330 FOR FURTHER INFORMATION ON THE PUBLIC REFERENCE ROOM.
FILINGS WITH THE SEC ALSO ARE AVAILABLE TO THE PUBLIC FROM COMMERCIAL
DOCUMENT-RETRIEVAL SERVICES AND AT THE WEB SITE MAINTAINED BY THE SEC AT
WWW.SEC.GOV.
PURSUANT TO INSTRUCTION 3 OF ITEM 4 OF SCHEDULE 14A, THE PARTICIPANTS
IN THE SOLICITATION INCLUDE MERISTAR, INTERSTATE, THEIR RESPECTIVE DIRECTORS,
AND MAY INCLUDE CERTAIN EXECUTIVE OFFICERS OF EACH. INFORMATION CONCERNING THE
MERISTAR DIRECTORS AND EXECUTIVE OFFICERS AND THEIR DIRECT AND INDIRECT
INTERESTS IN MERISTAR IS CONTAINED IN ITS PROXY STATEMENT FOR ITS ANNUAL MEETING
OF SHAREHOLDERS DATED MAY 8, 2001. INFORMATION CONCERNING THE INTERSTATE
DIRECTORS AND EXECUTIVE OFFICERS AND THEIR DIRECT AND INDIRECT INTERESTS IN
INTERSTATE IS CONTAINED IN ITS ANNUAL REPORT ON FORM 10-K/A FILED WITH THE SEC
ON APRIL 19, 2002. THE IDENTITY OF THE PEOPLE WHO, UNDER SEC RULES, MAY BE
CONSIDERED PARTICIPANTS IN THE SOLICITATION OF INTERSTATE AND MERISTAR
STOCKHOLDERS IN CONNECTION WITH THE PROPOSED MERGER, AND A DESCRIPTION OF THEIR
INTERESTS, WILL BE AVAILABLE IN A SCHEDULE 14A TO BE FILED BY INTERSTATE AND A
FILING UNDER RULE 425 UNDER THE SECURITIES ACT BY MERISTAR. AS OF THE DATE OF
THIS COMMUNICATION, NONE OF THE FOREGOING PARTICIPANTS BENEFICIALLY OWNED IN
EXCESS OF 1% OF THE MERISTAR COMMON STOCK, EXCEPT PAUL W. WHETSELL, AND STEVEN
D. JORNS, EACH A DIRECTOR AND/OR EXECUTIVE OFFICER OF MERISTAR, OR BENEFICIALLY
OWNED IN EXCESS OF 1% OF INTERSTATE COMMON STOCK, EXCEPT THOMAS F. HEWITT AND J.
WILLIAM RICHARDSON, KARIM ALIBHAI AND SHERWOOD WEISER, EACH A DIRECTOR AND/OR
EXECUTIVE OFFICER OF INTERSTATE.