Crestline To Merge With Barceló In $600M Deal

BETHESDA, MD— Crestline Capital Corp., parent company of Crestline Hotels & Resorts, has agreed to be acquired by Barceló Hotels & Resorts, based in Palma de Mallorca, Spain, for $601.8 million. The merger, expected to be complete by June 30, 2002, would create a new company named Barceló Crestline. After approximately a year of negotiations, the acquisition has officially been approved by the board of directors of both companies, and is now subject to approval from Crestline’s shareholders, certain franchisor consents, and other customary closing conditions. Per the agreement, each the 17.7 million fully-diluted outstanding shares of Crestline would be exchanged for $34 in cash. “We have been exploring strategic alternatives like acquisitions, joint ventures, mergers, and dispositions for quite awhile,” said Bruce Wardinski, chairman/president/CEO of Crestline. Wardinski noted that when Crestline exited out of its senior living business in January and disposed of several assets— including its full-service leases to Host Marriott and the sale of 10 Residence Inns to Apple Hospitality—the company generated a lot of cash and “was looking to unlock value for shareholders.” Determined to focus all of its efforts on hotel management, Crestline was looking for a transaction that complimented this growth strategy, he said. After researching many high-priced acquisitions opportunities, “we decided we did not want to deploy our capital in a big acquisition that was overpriced,” Wardinski stated. “Instead we chose to be a part of a global company… Crestline is now part of a bigger organization and we can build off that.” Barceló Hotels & Resorts is a 70-year-old private company owned 100% by the Barceló family and has been run by three generations of family members. Barceló and its affiliates own, manage, and lease 108 hotels in 16 countries, primarily located in Europe, the Caribbean, and Latin America. “They focus on group tourism business, like all-inclusive resorts,” said Wardinski. Under the new merger, Crestline will continue to manage and lease all of the 38 hotels in its portfolio, and the company does not plan to re-brand any of the properties with the Barcelo name. Crestline’s pipeline will also remain unaltered, and according to Wardinski, there are currently no plans for the company to assume management of the 18 U.S. hotels (totaling more than 4,000 rooms) that are owned and managed by Barcelo Hotels USA, an affiliate of Barcelo Hotels & Resorts. Additionally, he said, Crestline has no intentions to merge its Bethesda, MD, headquarter office with Barceló Hotels USA’s Washington D.C.-based office, and the properties Barceló currently manages in the U.S. will remain under their existing flags, which consist of Radisson, Sheraton, Four Points by Sheraton and Clarion brands. “Obviously we’ll be related to them [Barceló Hotels USA], but there are no plans to merge operations at this time,” he added, noting that Crestline will serve as a growth vehicle of Barceló in the U.S. and maybe “overtime the companies will do things together, but there are no current plans.” Overall, the merger is seen by Crestline as a tax-efficient vehicle to distribute the proceeds of dispositions its accumulated over the past 15 months, and it has “gotten a strong price for our shareholders as well as created a growth environment of the company. It’s a win-win situation for the shareholders and associates,” he added.