Patriot American adopts stock plan Shareholders could buy stock cheaply during outside takeover attempt

Lodging

December 23, 1998|By BLOOMBERG NEWS

DALLAS -- Patriot American Hospitality Inc., one of the largest U.S. hotel companies, adopted a plan that would let existing shareholders buy stock cheaply in the event of a takeover attempt, making any acquisition more expensive.

The Dallas-based real estate investment trust, which owns the Wyndham hotel chain, said the shareholder-rights plan wasn't adopted in response to any known imminent takeover attempt.

"This is not to discourage any discussions," said Patriot American chief executive Paul Nussbaum. "It's just to make sure they proceed in an orderly fashion."

The plan comes a week after the company -- which is scheduled to buy the $134 million Wyndham Inner Harbor East Hotel in Baltimore being developed by H&S Bakery Inc. co-owner John Paterakis Sr. and a pair of Atlanta companies -- agreed to sell a 30 percent stake for $1 billion to an investor group led by financiers Leon Black and Thomas Lee. The deal would give Patriot cash to help repay $1.7 billion of bank debt and other obligations coming due over the next 15 months.

The adoption of the rights plan isn't connected to last week's equity sale, Nussbaum said, noting that Patriot American has been considering adopting the plan for about three months.

The company also said its board appointed director Susan T. Groenteman to serve as liaison with management and the company's advisers on exploring strategic alternatives for the company.

Under the shareholder rights plan, Patriot American said, it will pay a dividend of one preferred stock purchase right for each outstanding share of common stock and each outstanding share of Series A Convertible Preferred Stock to shareholders of record as of Dec. 20.

The rights generally won't be exercisable unless an investor becomes an "acquiring person" by gaining 10 percent of more of Patriot American's common stock, or if an investor begins a tender offer that results in ownership of 10 percent or more of the stock. The rights would then entitle the holder to buy common stock having a value of twice the exercise price of the rights.

Patriot American shares fell 12.5 cents to $5.875 yesterday. The rights program was announced after the close of U.S. markets Monday.

Pub Date: 12/23/98

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