ATLANTA— If a proposed merger agreement inked last week pans out, by second quarter privately held InTown Suites Management will become the parent of Suburban Lodges of America. However, if the deal isn’t completed by May 14, either company can walk away, albeit to the tune of a $5 million break-up fee. The breakup fee came to light as part of publicly traded SLA’s filing of an 8-K form with the Security and Exchange Commission on Jan. 30. According to the filing, SLA would shoulder the fee if the deal is canceled because its board of directors withdraws changes or its recommendation of the transaction. Overall, the pact calls for InTown to acquire all of SLA’s outstanding common stock for $8.25 per share in cash and a proportionate interest in a liquidating trust set up for the benefit of shareholders. The directors, an affiliate of certain directors and several executive officers of Suburban Lodges, who combined have the power to vote approximately 28.8% of SLAs outstanding shares, have agreed to support and to vote in favor of the merger at a yet-to-be scheduled shareholders meeting. The principal shareholders include David Krischer, CEO; Gregory Plank, president; Dan Berman, president, Suburban Franchise Systems; Paul Criscillis Jr., vp/CFO; G. Hunter Hilliard, vp/construction; Kevin Pfannes, vp/general counsel; and John Spiegel, Raymond French, Paul Coulson and Sharewell Securities Trading Ltd. Pending approval by SLA shareholders (plus other conditions), Suburban Lodges and its own subsidiaries will become wholly owned subsidiaries of InTown Suites, giving it SLA’s two brand portfolios— Suburban Lodge and GuestHouse International, representing 126 (16,885 rooms) and 74 ( 5,529 rooms) properties respectively. SLA includes 65 corporate-owned Suburban Lodges in its portfolio; its anticipated they will be reflagged as InTown Suites. Both brands are extended-stay products, although at different price points, with SLA usually commanding a higher unit rate. Both InTown and SLA are in a so-called “quiet” period pending the merger and would neither confirm nor deny if the Suburban properties would be reflagged. According to Cheryl Boyer, senior manager of PricewaterhouseCoopers’ Hospitality and Leisure Industry Practice, the proposed merger “is an appropriate consolidation of two companies with complementary product. Based on that, it seems there should be some potential cost savings for the two companies operating as one larger company. It’s also an example in the industry of what can be done with private capital.” Pre-merger, SLA intends to divest anticipated development real estate, and transfer unsold parcels, net cash proceeds from any such sales, and other assets to the liquidating trust. The trust is charged with selling those assets distributing available proceeds to the shareholders one year after the merger closes. SLA reported it estimates shareholders may receive up to $9.04 per share as total consideration for their shares, based on estimations that the liquidating trust will distribute up to $0.79 per share, although that may differ. At press time no date had been set by SLA for either the shareholders’ meeting or filing a proxy statement with the Securities and Exchange Commission. “It’s good to see these deals happening again,” said PwC’s Boyer. “It’s been slow going in the last quarter of 2001 and so far this year but I think we’re past the trough that we saw in the fourth quarter of last year and we’re starting to hear some more optimistic notes about the economy and that’s the background against which this deal continues to progress.”
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