Monday, December 11, 2000
Steamboat Springs American Skiing Co., the parent of the Steamboat Ski Area, has acquired the nation's largest independent hotel management company in a $185 million stock swap both companies are calling a merger.
American Skiing will join with a company called MeriStar Hotels and Resorts to form an entirely new company, Doral International. American Skiing Co. Chairman Les Otten will serve in that capacity with the new company. Current president and chief executive officer of MeriStar, Paul W. Whetsell, will be the CEO of Doral International.
Otten said Monday the employees of the nine ski areas operated by American Skiing shouldn't notice any changes as a result of the merger other than increased synergies and a financially stronger company.
"This merger is an incredible combination for us and accelerates our ability to realize growth. This is a powerhouse combination," Otten said. "It opens up new channels for growth and will deliver shareholder value faster."
The merger isn't expected to be finalized until the middle of the first quarter of 2001, perhaps by the end of February.
MeriStar is in the hotel management business it generates revenues by contracting to manage a range of brand name hotels all over the country. Most of the hotels are in warm-weather climates and Otten said the merger would offer American Skiing a more consistent source of year-round revenue that isn't so dependent upon the weather.
The new company will have assets of about $1.2 billion, Whetsell said. When the merger is complete, Doral International will own or manage nine ski resorts, 23 resort hotels, 246 other hotels, 15 golf courses and four conference facilities.
"The merger gives us the size, the scale and growth platform to become a leader" in the resort hospitality industry, Whetsell said.
American Skiing essentially acquired MeriStar by agreeing to issue 1.88 shares for every share of MeriStar. The offer means shareholders in MeriStar will realize a 100 percent premium over what their stock was worth when trading closed on the New York Exchange Friday.
Otten said shareholders in American Skiing will benefit from having a more financially stable company with more consistent revenue streams.
"The merger reduces the volatility of our financial situation," Otten said. The marriage with MeriStar instantly gives American Skiing access to 18 million new customers, Otten added.
Oak Hill Capital Partners, which had acquired a majority interest in American Skiing through loans, will own more than 45 percent of Doral International and will name four members to the 11-member board. Otten and Whetsell will be the only "insiders" on the board. The remaining five members will be independent directors.
Under the terms of the merger, the current loans of both companies will be replaced by a new $285 million bank loan. Whetsell said Monday he is committed to reducing Doral International's debt (American Skiing finished fiscal 2000 with $450 million in debt) and to converting the average interest rate that will be paid by the combined companies from 13 percent to a more manageable 10 percent. That alone could realize annual interest savings for the new company of $15 million, he said.
The Steamboat Ski Area will be managed under one of four business units within the new company the Doral Leisure division. It will be headed by William "B.J." Fair, current chief operating officer of American Skiing.
Doral International will be headquartered in Washington, D.C., where MeriStar is presently based.
The company tentatively expects pro forma 2001 revenues of about $600 million and pro forma earnings before interest, taxes and depreciation in excess of $100 million.