MeriStar Hospitality Corporation (NYSE: MHX), the nation’s third largest hotel real estate investment trust (REIT), today announced that its board of directors had unanimously approved the proposed merger between MeriStar Hotels & Resorts, Inc. (NYSE: MMH) and American Skiing Corporation (NYSE: SKI). MeriStar Hospitality, under its “paper clip” arrangement with MeriStar Hotels & Resorts, has the right to approve any such proposed mergers. The merged company, to be renamed Doral International, will retain a paper clip relationship with the REIT and will continue to manage 106 of the REIT’s hotels.
“The success of both companies is intertwined in the paper clip structure, and we believe the proposed merger will have a positive impact on the two companies,” said Paul W. Whetsell, chairman and CEO of MeriStar Hospitality. “From the REIT’s perspective, we gain access to a broader customer base and benefit from additional marketing and operating synergies. A higher-profile Doral brand will help our three REIT-owned Doral properties, and all of our hotels will have more resources to call upon.”
Whetsell added that the REIT Modernization Act (RMA), which takes effect January 1, 2001, will even more closely align the interests of the operator and the REIT. “The RMA allows us to focus on the common objective of improving our hotels’ bottom lines.”
Whetsell noted that he and John Emery, the REIT’s chief operating officer who will be chief financial officer at Doral International, will continue to be involved closely in the strategic management of both companies. “Nothing really changes in our operations,” he said. “We will continue to share services as we have in the past and look for ways to enhance the paper clip arrangement to optimize shareholder value in both companies. David McCaslin, MeriStar Hotels & Resorts’ president, and his team will continue to operate our hotels with no changes in their management structure.” Following the merger, MeriStar Hospitality and Doral International will have three common board members.
As a result of the merger, the REIT will reduce its loan commitment from $50 million to $25 million. “The remaining loan commitment is a positive investment for the REIT,” said Emery. “We expect accretion to funds from operations from the loan, when fully funded, to be in the range of $0.06 to $0.08 per share.”
MeriStar Hospitality Corporation owns 114 principally upscale, full-service hotels in major market and resort locations with 29,090 rooms in 27 states, the District of Columbia and Canada. The company owns hotels under such internationally known brands as Hilton, Sheraton, Marriott, Westin, Radisson and Doubletree.
For more information about MeriStar Hospitality, visit the company’s Web site: www.meristar.com.
This press release contains forward-looking statements about MeriStar Hospitality Corporation, including those statements regarding future operating results and the timing and composition of revenues, among others. 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 following: the ability of the companies to complete the merger, the ability of the company to successfully implement its acquisition strategy and operating strategy; the merged company’s ability to manage rapid expansion; significant leverage; changes in economic cycles; competition from other hospitality companies; and changes in the laws and government regulations applicable to the companies.