Starwood Hotels & Resorts Worldwide, Inc. (NYSE: HOT) announced today that it has acquired the Le Meridien brand and the related management and franchise business for the portfolio of 130 hotels and resorts globally for approximately $225 million, roughly equal to the amount of Starwood's current investment, including accrued interest, in the debt of Le Meridien. The completion of this acquisition will significantly increase the company's foot print in Europe, Africa, Middle East and Asia Pacific.
The acquisition of the Le Meridien brand management and fee business further supports Starwood's strategic shift from its significant real estate ownership to a management and franchise fee focused model, one of the strategic pillars that underpin Starwood's future direction.
"The acquisition of the Le Meridien brand is an exciting and significant development for Starwood that we believe further defines us as a truly global hotel operator," said Steven J. Heyer, CEO of Starwood Hotels & Resorts. "We love the Le Meridien brand which is why we have pursued it over the last couple of years - we see great potential. Le Meridien is a perfect complement to the Starwood portfolio, with its international footprint and unique guest culture. Le Meridien hotels and resorts represents both a great growth opportunity, alongside Starwood's W and Westin brands, and extends the number of destination choices of travel to Starwood loyalists across the world".
With 43 properties in Europe, 47 properties in Africa and the Middle East, 28 properties in Asia Pacific and India and 12 in the Americas the brand is also a perfect complement to Starwood's current geographical footprint, securing its position as one of the leading consumer lifestyle hotel and leisure companies in the world.
"Le Meridien hotels are located in many markets where we don't already have a strong presence. This coupled with the brand's excellent reputation and its strong European DNA, is what made it such an attractive proposition for us," added Heyer. "In addition, we have great plans to expand the brand - particularly in the United States, Latin America and Asia-Pacific - to enhance the brand itself, and build on its great reputation and people. It provides us with another growth engine for our development team bringing the current hotel brand portfolio to eight, including our recently announced aloft."
Starwood will continue to operate the Le Meridien flag and anticipates that the alignment of the Le Meridien brand with a larger, stable, multi-branded hotel group will enable the brand to thrive by enhancing revenue, accelerating growth and providing a robust career path for Le Meridien's associates worldwide.
Le Meridien's predominantly European customer base is a perfect complement to Starwood's existing customer base. The 130 high end properties will bring Starwood's over 24 million Starwood Preferred Guest (SPG) customers more choice in key markets such as Paris, Nice, Dubai, and London. In addition it will add destinations where there is no Starwood property at present such as Monte Carlo, Barcelona, Budapest, the Seychelles and Mauritius. This match will also bring access to some 750 exciting new destinations for Le Meridien's loyal customers.
Le Meridien has a healthy development pipeline already in place, including the recently opened Le Meridien She Shan Shanghai, a luxury 325 room hotel in the city. There are over 10 hotels planned to open in 2006, in destinations such as India, Thailand and China.
Management and franchise fees from the hotels expected to operate under the Le Meridien flag in 2006 are estimated to be approximately $45 million on a full year basis. Incremental steady state costs associated with operating the Le Meridien brand are estimated to be approximately $15 million per annum. Excluding transition costs, the deal is expected to be earnings neutral for the remainder of 2005 and slightly accretive in 2006.
Starwood, which assumes control of Le Meridien effective immediately, anticipates significant business benefits from Le Meridien's alignment with Starwood, following what Heyer says will be a "smooth and speedy" transition period. The transition will be led by Michael Wale, Senior Vice President Le Meridien Operations. Based in London, he and the Starwood integration team will leverage Starwood's global scale and infrastructure to quickly bring about operating efficiencies for Le Meridien and to integrate it into the Starwood business within 6-9 months. Costs associated with operating and maintaining duplicate structures and systems during the transition are expected to be approximately $ 35 - 40 million and will be expensed as incurred. It is anticipated that approximately $ 8 - 10 million of these transition costs will be expensed in the fourth quarter of 2005. Additionally, Starwood expects to incur one-time costs of approximately $55 million directly attributed to the acquisition and integration of the brand.
Starwood Hotels & Resorts Worldwide, Inc. is one of the leading hotel and leisure companies in the world with more than 850 properties in more than 95 countries and 145,000 employees at its owned and managed properties. Starwood(R) Hotels is a fully integrated owner, operator and franchisor of hotels and resorts with the following internationally renowned brands: St. Regis(R), The Luxury Collection(R), Sheraton(R), Westin(R), Four Points(R) by Sheraton, W(R), Le Meridien(R) and the recently announced Aloft(SM). Starwood Hotels also owns Starwood Vacation Ownership, Inc., one of the premier developers and operators of high quality vacation interval ownership resorts. For more information, please visit www.starwoodhotels.com.
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(Note: This press release contains forward-looking statements within the meaning of federal securities regulations. Forward-looking statements are not guarantees of future performance or events and involve risks and uncertainties and other factors that may cause actual results or events to differ materially from those anticipated at the time the forward-looking statements are made. These risks and uncertainties include the risk that the anticipated benefits of the transaction will actually be realized as well as other risks and uncertainties presented in detail in our filings with the Securities and Exchange Commission. Although we believe the expectations reflected in such forward-looking statements are based upon reasonable assumptions, we can give no assurance that our expectations will be attained or that results and events will not materially differ. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.)
CONTACT:
Starwood Hotels & Resorts
Carla Burt, 914-640-8076 or 914-837-9343
