Ramada to Sell Hotel Unit to Hong Kong-Based Firm
Ramada Inc., best-known for its moderately priced hotel rooms, said Tuesday that it would sell its hotel chain to New World Development Co. for $540 million, freeing Ramada to concentrate on its casinos.
Phoenix-based Ramada began a restructuring in October and the sale of the chain of more than 825 hotels is a major step in the overhaul.
New World also said Fairfield, N.J.-based Prime Motor Inns Inc. would participate in the transaction and operate Ramada’s U.S. franchise system consisting of more than 600 hotels under the Ramada Inn, Ramada Hotel and Roadway banners.
New World is a large real estate company based in Hong Kong. “We recognize Ramada’s dedication to quality and service and its achievements internationally in recent years,” said New World managing director Henry Cheng.
Bought Tropicana in 1979
The Ramada name, adopted in 1959, will stay with the hotels. The new gaming company will take on a different name, to be introduced later.
“New World and Prime are making a major commitment to achieve success for the 800-plus hotels to the Ramada and Rodeway systems. The present Ramada Inc. shareholders will benefit from their investment with cash and a continuing interest in the new gaming company,” Ramada Chairman and Chief Executive Richard Snell said in a statement.
The hotel company, whose roots go back to 1954 when a group of investors opened a roadside hotel in Flagstaff, Ariz., entered the gaming business in 1979, when it bought the Tropicana casino hotel in Las Vegas.
In addition to the Tropicana property, it owns TropWorld Casino & Entertainment Resort, the biggest gaming facility in Atlantic City, N.J., the Ramada Express Hotel Casino in Laughlin, Nev., and Eddy’s Fabulous ‘50s Casino in Reno.
Ramada said the sale of the hotel chain will be done by merging a subsidiary of New World into Ramada. As a result of the merger, each outstanding Ramada common share will be converted into the right to receive $7 in cash and one-quarter of a common share in a new company formed to own and operate Ramada’s gaming business.
Ramada shares on the New York Stock Exchange closed down 75 cents to $11.375 after the announcement.
Released First-Quarter Results
Ramada said completion of the transaction is subject to certain conditions, including approval of its shareholders, approval of Nevada and New Jersey gaming regulators and completion by the new gaming company of certain financings required to put the restructuring plan into action.
Ramada said its annual meeting will be delayed beyond its regular date of May 11 because of the proposed transaction.
The company also released a preliminary estimate of its first-quarter results, saying continuing operations lost about $19 million, compared to a year-earlier loss of about $364,000.
Revenue from continuing operations, principally its gaming operations, rose to $124 million from $101.9 million in the prior-year quarter.
The company said first-quarter operating results were hurt by a lower-than-expected take from its gaming tables in Las Vegas and other casinos.