Marriott's merger and spinoff OK'd Food service business to become part of Sodexho Marriott

Vote closer than expected

Company remaining the world's largest hotel operator

March 21, 1998|By Kevin L. McQuaid | Kevin L. McQuaid,SUN STAFF

Marriott International Inc. shareholders yesterday approved a merger between the Bethesda-based company and a French food services firm that will create North America's largest contract management concern, with annual sales of $4 billion.

In approving the deal to create Sodexho Marriott Services Inc., stockholders also blessed Marriott's plan to spin off its lodging, senior living and distribution businesses. As a result, Marriott will maintain its rank as the world's largest hotel company, with operations in 54 countries and 1997 sales of $12 billion.

Shareholders were not asked, however, to approve several anti-takeover provisions that the company had attempted to link to the merger vote but dropped when key stockholders and their advisers balked.

"We are very pleased with this endorsement by Marriott stockholders," said J. W. Marriott Jr., the company's chairman and chief executive. "The transactions approved today will create two strong, well-focused and growth-oriented companies."

Marriott said it would complete the tax-free spinoff and Sodexho Alliance merger on March 27.

Of the 104 million Marriott shares that were voted, 85 percent approved the plan. However, that was only 71 percent of the 125 million shares outstanding, narrowly more than the two-thirds majority Marriott needed for the spinoff to go through, according to its corporate charter.

"It didn't receive approval by a wide margin, and it's not clear to me why," said Thomas Graves, a S&P Equity Group analyst who follows the company. "I like the transaction. Having a lodging BTC company without a lot of debt and a separate services business seems a reasonable way to improve shareholder value." Graves speculated that the close vote may have stemmed from the controversy that originally surrounded it.

The Marriott plan came under fire when a proxy statement indicated the company had linked approval of the Sodexho merger with several anti-takeover provisions, as well as a plan to issue a new class of stock that some shareholders feared would have cemented Marriott family control over the company. Marriott family members now control 20 percent of the company.

As a result of the link, Marriott's union and two prominent shareholder consultants recommended that shareholders reject the merger. Marriott, in turn, postponed the March 17 vote until yesterday, sent letters to shareholders urging them to vote yes, and dropped the controversial link.

Even with the affirmative vote, though, Marriott will have to hold a second election to fully implement its plan. On May 20, at its annual shareholders meeting, the company intends to hold a vote on its plan to maintain two classes of stock, which the company contends is necessary for future acquisitions and growth.

Unlike the merger and spinoff vote, however, the dual stock provision requires a simple majority for passage. If it fails to pass, the company has pledged to unite the two classes of stock and remove dual stock provisions from its charter.

Pub Date: 3/21/98

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.