The future partners have entered into a "non-binding letter of intent" to form the venture. Starwood officials say the transactions would involve Starwood Hotels purchasing the Le Meridien brand and related management and franchise business. Starwood Hotels would also enter into management agreements for the entire Le Meridien portfolio, which includes 135 properties in 56 countries.
An affiliate of Lehman Brothers and Starwood Capital Group would acquire the portfolio of 36 owned and leased Le Meridien hotel properties. In addition, Le Meridien's Forte Village resort in Sardinia, Italy will be acquired by an affiliate of Lehman Brothers. If the deals are finalized, all 135 Le Meridien hotels would continue to be operated under their current flags, Starwood officials say.
The acquisition proposals will be presented to the Board of Directors of Le Meridien as part of a recapitalization plan for Le Meridien Hotels & Resorts. The transactions and recapitalization are expected to be completed in the third quarter of 2005. Lehman Brothers acquired the senior debt of the troubled international hotelier, estimated at approximately 700 million pounds, in December 2003.
Le Meridien CEO Robert Riley says, "If completed, these arrangements would at long last provide for the consensual recapitalization of the Group. Le Meridien has a well-respected and unique identity with strong customer loyalty, and skilled, experienced and passionate employees. Its alignment with a robust, multi-branded management company like Starwood Hotels should enable the Le Meridien brand and its hotels to thrive by enhancing revenue and accelerating growth."
"The joint venture with Lehman Brothers and Starwood Capital Group should provide a financially strong structure for the current owned and leased portfolio," he adds. "Providing an independent ownership structure for the Forte Village should create new potential for this world famous property."
Starwood issued a statement that reads, "As our announcement today indicates, negotiations on the recapitalization of Le Meridien are moving forward and we remain very interested in the brand." According to a statement released by Le Meridien, the proposed Starwood-Lehman joint venture transactions and company recapitalization are expected to be completed during the third quarter of this year and are subject to regulatory approvals as well as the go-ahead from Le Meridien stakeholders and the company's board of directors.
Le Meridien was founded in 1972 by Air France to provide a home for its air passengers. Last year, the group opened 10 new hotels. A further 21 new properties are in the pipeline and are scheduled to open during 2005 and beyond, including the Le Meridien Sunny Isles Beach in Miami, which is scheduled to open this spring. But the hotel group has found itself dealing with mounting financial difficulties since 9/11. Lehman is one of Le Meridien's biggest creditors. Starwood Hotels & Resorts employs 120,000 workers and has 750 hotel/resorts properties in more than 80 countries.
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