Holiday Corp. said today it will sell its Holiday Inn hotel system to Bass PLC, Britain's giant brewery, pub and hotel conglomerate, for $2.23 billion and create a subsidiary to operate the company's gaming operations and three newer hotel chains.
Holiday Chairman Michael Rose said the company decided to sell the Holiday Inn system because "it became increasingly clear to us that a separation of Holiday Inns from Holiday Corp.'s other brands (properties) was the most effective positioning of the brands in the 1990s and beyond."
Holiday's other hotels include Embassy Suites, Hampton Inn and Homewood Suites. Rose said these chains have "reached levels of development that will make them increasingly competitive with Holiday Inns."
Bass will acquire 55 owned or leased properties, as well as franchise agreements, joint venture agreements and management contracts that cover about 1,400 Holiday Inn hotels in North America.
Stock Shoots Up
The agreement calls for Bass to merge a new U.S. subsidiary with Holiday, converting each share of Holiday stock into about a quarter of a share of Bass stock. Holiday will retire or assume about $2.1 billion in debt.
Holiday stock shot up $10 to $87 a share in early New York Stock Exchange trading today. On Wednesday, the company's stock shot up $7.87 1/2 in anticipation of today's announcement.
Last year, Bass bought the rights to franchise Holiday Inn hotels outside North America. As the result of that and other purchases it already owns 14 Holiday Inn hotels in the southeast United States and is a major franchisee in Canada.
Bass, with annual sales approaching $6 billion, has more than 7,300 pubs and other food and drink outlets in Britain. It brews Bass, Carling Black Label and other beers and has annual sales approaching $6 billion.
In May, Holiday formed a partnership with a Japanese company to develop hotels in the United States.
The spinoff company to operate the three newer hotel chains and Holiday's Harrah's casinos in Nevada and New Jersey will be run by Holiday's present senior management group in Memphis and will be named at a later date.
"The spinoff company, formed around Harrah's and these rapidly growing brands, will be given a new name that reflects the dynamism, prospective growth and commitment to excellence that will characterize it," Rose said.
The transactions announced today must be approved by stockholders from both companies, as well as Nevada and New Jersey gaming officials.