Marriott's linking of vote to stock plan criticized Merger approval would strengthen family control


March 03, 1998|By Kevin L. McQuaid | Kevin L. McQuaid,SUN STAFF

Marriott International Inc. is drawing fire for linking a midmonth shareholder vote on a planned merger with provisions that would likely cement Marriott family control over the Bethesda-based lodging giant.

The criticism stems from material contained in a recent Marriott proxy statement filed in conjunction with its planned merger with Sodexho Alliance S.A. In the proxy, Marriott says it intends to issue a new class of voting stock that will subordinate the company's existing common stock.

"There's no advantage to common shareholders here," said Matthew Walker, a spokesman for the Hotel Employees & Restaurant Employees International, which represents thousands of Marriott workers. "The advantage is to the Marriotts. It's like if you want this deal, you have to swallow all this other stuff. It's like holding a gun to shareholders' heads."

Marriott family members control roughly 20 percent of the company. The 514-page proxy statement says family members are conducting estate plans and want the two-tiered stock system for estate planning purposes.

Marriott, which will form a new company for its hotel holdings if the merger is completed, also would retain anti-takeover provisions at a time when the lodging industry is consolidating and takeovers are becoming common.

Last year, for instance, Starwood Lodging Trust won a $13.7 billion war with Hilton Hotels Corp. for control of ITT Corp.

Marriott officials contend the new stock will prevent dilution for existing shareholders and that the anti-takeover measures -- which it calls "shareholder rights" provisions -- are similar to existing ones.

"The new stock positions us to grow more rapidly in the future by giving us an additional currency to make acquisitions," said Michael Stein, Marriott's chief financial officer.

Stein added that the company is not a takeover target, nor are the anti-takeover measures -- including a so-called "poison pill," unauthorized shareholder meeting prohibitions and a staggered board of directors -- the result of fear of a takeover.

If approved, Marriott stockholders will receive 10 shares of the new stock for every one share currently held after the merger.

Marriott's plan may be in for additional criticism from a shareholder advisory group.

Institutional Shareholder Services (ISS), which advises institutional stockholders on proxy and merger issues, intends to send a letter to clients today with a vote recommendation.

"It's somewhat unusual," Mark Brockway, a senior analyst at ISS, said of the link between the vote and the stock deal. "We prefer shareholders to be able to vote on things as stand-alone issues."

Marriott shareholders will vote on the plan on March 17.

"We think we can compel the company to unbundle the merger vote from these provisions," Walker said. "Because the Marriott brothers have more to gain from this than anyone else, and they don't want to see it go up in smoke."

Pub Date: 3/03/98

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