Doubletree to Buy Red Lion for $1.2 Billion
Doubletree Corp. is acquiring Red Lion Hotels Inc. in a cash and stock deal worth about $1.2 billion, the companies said Thursday--a move that would create one of the largest hotel chains in the nation.
Most Red Lion operations would adopt the Doubletree name. The deal, which is subject to shareholder approval, is expected to be completed by year-end.
The combined company would have more than 230 hotels and motels with about 56,000 rooms in 39 states, the District of Columbia and Mexico.
Red Lion shareholders stand to receive a total of $30.11, $21.30 in cash and $8.81 in Doubletree stock, slightly less than a quarter of a Doubletree share--for each share in Red Lion, subject to adjustment.
Two-thirds of the shares in Red Lion, based in Vancouver, Wash., are held by a limited partnership involving the public pension funds of Washington and Oregon, Red Lion co-founder Tod McClaskey and New York buyout firm Kohlberg Kravis Roberts & Co.
Principals in the partnership are supporting the merger, as are General Electric Investments and Doubletree co-Chairmen Richard J. Ferris and Peter V. Ueberroth, who collectively hold about 39% of the stock in Doubletree, which is based in Phoenix.
Doubletree President Richard M. Kelleher said Red Lion management was approached about the idea of a merger several months ago.
“We believe that bringing Doubletree and Red Lion together will create a more dynamic combined enterprise, help increase the visibility of the Doubletree brand and enhance our competitive position in the upscale, full-service segment of the North American lodging industry,” Kelleher said.
The takeover is being financed by issuing $100 million in Doubletree stock to General Electric Investments, about $280 million of Doubletree common stock to Red Lion shareholders, about $600 million of institutional debt and an equity offering of Doubletree stock.
Doubletree’s debt as a percentage of total capital would be less than 50%, the announcement said.
The partnership of Kohlberg Kravis Roberts, McClaskey and the two state pension funds would wind up with about a 13% holding in Doubletree and two seats on what would become a 10-member board of directors.
Operations of Red Lion Inns Master Limited Partnership, which owns 10 hotels, are not included in the deal, although Doubletree would manage those properties.
As of June 30, Doubletree had 179 operations--Doubletree Hotels, Doubletree Guest Suites and Club Hotels by Doubletree--with 41,232 rooms under lease, management contract or franchise agreement in 37 states, the District of Columbia and Mexico.
Red Lion had 55 hotels containing approximately 14,500 rooms in the Western United States.
The deal was announced after trading had ended for the day. Red Lion closed at $28.75 on the New York Stock Exchange and Doubletree at $37 on the Nasdaq Stock Market, both down 37.5 cents.
