GlobeSt.com UPDATE: $2.7-Bil Hotel Takeover to Hit in Mid-October

Schafer says short of polling an estimated 35,000 shareholders "the sentiment is pretty strong" that the deal will be OK'd. Shareholders of record as of Aug. 24 are eligible to vote on the buyout. All SEC requirements are done, the financing's in place and FelCor is ready to go as soon as the vote is tallied. The meeting begins at 10 a.m. in the REIT's offices at 545 E. John Carpenter Freeway, Irving. Proxy material went out in this week's mail.

"We look forward to a successful shareholders' vote," FelCor president and CEO Thomas J. Corcoran said in a prepared statement. "Despite the current challenging operating environment and Tuesday's tragedy, the strategy and benefits of the merger, remain unchanged and favorably position the company as the largest hotel REIT."

A firm date has been unavailable since the takeover strategy went into play in March. Corcoran once thought it would be September and then revised his call, saying sometime in the third quarter. But, said a FelCor contact, it just took awhile to get everything in order. Zeroing in on a shareholders' meeting date makes it possible to game out the closing date.

The merger will give FelCor roughly another 28,000 rooms at 113 hotels and suites and beef up pro forma capitalization up to $6 billion from $3.3 billion. FelCor's current portfolio contains 185 hotels, totaling about 50,000 rooms.

In line with the upcoming action, FelCor has jumpstarted a plan to trade bonds in the public market. FelCor and a limited partner subsidiary kicked off offers to exchange up to $100 million in aggregate principal amount of the LP's 9.5% senior notes and up to $600 million of its 8.5% senior notes. MeriStar simultaneously is offering to exchange $300 million aggregate principal amount of its 9% senior notes and another $200 million of 9 1/8% senior notes. Both offers close Oct. 11.

The takeover plan calls for FelCor to assume $1.6 billion of MeriStar debt plus shell out $240 million in cash and pay the balance of the $2.7 billion in stock. In the deal, MeriStar also gets a 12-year contract, with three five-year options, to manage the hotels.

Corcoran will be chairman and CEO of the combined company. Paul W. Whetsell, MeriStar chairman and CEO, and Steven D. Jorns, vice chairman, will be placed on the combined company's board. Whetsell is staying in Washington, DC, but Jorns has lived in Ft. Worth for some time.