Doubletree Acquires Red Lion Another Name Change In Store For Downtown Hotel?

Doubletree Corp. is acquiring Red Lion Hotels Inc. in a cash and stock deal worth about $1.2 billion, including assumption of $200 million in debt, officials of both companies have announced.

Most Red Lion operations will adopt the Doubletree name once the deal is complete, an announcement by the two companies said Thursday.

The Red Lion in downtown Spokane will keep its name for a minimum of three months, and likely for longer, said Brian Bell, spokesman for Red Lion.

Once the deal is done, Bell said, Doubletree Inns will examine each Red Lion property to decide if it will change it over. The same holds true for the Red Lion Inn in the Spokane Valley.

The two companies have more than 230 hotels and motels with some 56,000 rooms in 39 states, the District of Columbia and Mexico.

Red Lion shareholders stand to receive $30.11 - $21.30 in cash and $8.81 in Doubletree stock, slightly less than one-fourth of a Doubletree share - for each share in Red Lion, subject to adjustment.

The deal was announced after trading had ended for the day. Red Lion closed at $28.75 on the New York Stock Exchange and Doubletree at $37 on the Nasdaq Stock Market, both down 37.5 cents.

The deal is expected to close by the end of the year, subject to approval by shareholders of both companies.

Two-thirds of the shares in Red Lion, based in Vancouver, Wash., are held by a limited partnership involving the public pension funds of Washington and Oregon, Red Lion co-founder Tod McClaskey and Kohlberg Kravis Roberts & Co.

Principals in the partnership are supporting the merger, as are General Electric Investments and Doubletree co-chairmen Richard J. Ferris and Peter V. Ueberroth, who collectively hold about 39 percent of the stock in Doubletree, which is based in Phoenix.

Doubletree President Richard M. Kelleher said Red Lion management was approached about the idea of a merger several months ago.

“We believe that bringing Doubletree and Red Lion together will create a more dynamic combined enterprise, help increase the visibility of the Doubletree brand and enhance our competitive position in the upscale, full-service segment of the North American lodging industry,” Kelleher said.

The takeover is being financed by issuing $100 million in Doubletree stock to General Electric Investments, about $280 million of Doubletree common stock to Red Lion shareholders, about $600 million of institutional debt and an equity offering of Doubletree stock.

Doubletree’s debt as a percentage of total capital will be less than 50 percent, the announcement said.

The partnership of Kohlberg Kravis Roberts, McClaskey and the two state pension funds will wind up with about a 13 percent holding in Doubletree and two seats on what will become a 10-member board of directors.

Operations of Red Lion Inns Master Limited Partnership, which owns 10 hotels, are not included in the takeover, although Doubletree will manage those properties.

The Spokane Valley Red Lion Inn is among those 10 hotels not included in the purchase.

As of June 30, Doubletree had 179 operations - Doubletree Hotels, Doubletree Guest Suites and Club Hotels by Doubletree - with 41,232 rooms under lease, management contract or franchise agreement in 37 states, the District of Columbia and Mexico.

Red Lion had 55 hotels containing approximately 14,500 rooms in the western United States.

, DataTimes