Airport food giant to be sold

Italian firm to buy Host Marriott for $929 million

Md. firm's stock rises 60%

Acquisitions

July 27, 1999|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

Host Marriott Services Corp. of Bethesda, which runs food concessions at airports, highway rest stops and shopping malls across the country, will be acquired by Autogrill SpA, Italy's top fast-food restaurant company, for $929 million in cash and debt, the companies said yesterday.

Autogrill's acquisition will create the world's biggest network of restaurants at airports, train stations, highway rest stops and malls, with more than 834 sites generating annual sales of more than $2.6 billion.

Under the agreement -- approved by Autogrill's board of directors but subject to regulatory approval -- Autogrill will pay Host Marriott Services shareholders $15.75 per share and assume $400 million in debt.

Host Marriott Services has 33.6 million shares outstanding. Yesterday's announcement boosted share prices to $15.4844, up nearly 60 percent from Friday's closing price of $9.75.

"It's a good move for the company -- and for shareholders," said Mario D. Cibelli, an analyst with Robotti & Co. in New York. "It's something they considered strongly from time to time. Now seems like the right time."

For Autogrill, "It gets them into markets they weren't into before," he said.

The agreement calls for Host Marriott Services to become an Autogrill subsidiary.

"We're creating a company, when combined, that I think will be far better positioned to compete and grow globally," said Bill McCarten, president and chief executive officer of Host Marriott Services. "Autogrill has a significant presence in Italy and is growing in Europe. We have a strong presence in North America."

He said he expects the deal will enable the company to expand to airports, railway stations and shopping malls in Europe, McCarten said.

The former subsidiary of Host Marriott Corp., which was spun off into an independent entity in 1995, reported sales last year of $1.4 billion.

With nearly 200 sites and 26,000 employees in seven countries, Host Marriott Services is the nation's top operator of food and retail concessions at travel and entertainment venues, such as a Times Square complex opening next year.

Host Marriott Services also has built a portfolio of brands it can use in its locations. It has franchise agreements with restaurant and retail chains, such as Au Bon Pain, Baskin Robbins, Nathan's Famous, Pizza Hut, Roy Rogers, Sbarro, Starbucks Coffee, Bath & Body Works, Sunglass Hut and Victoria's Secret.

Seventy percent of revenue comes from airport food concessions. The company runs food courts or restaurants in 70 U.S. airports, including in 18 of the 20 largest. At Baltimore-Washington International Airport, Host Marriott Services runs two mini food courts, Dunkin Donuts, Burger King, Celebrate MD and the Museum Company, among other retail stores.

It also runs food operations in 90 highway rest stops, including those along the New Jersey Turnpike and the Maryland House and Chesapeake House in Maryland. More recently, Host Marriott Services has branched into running mall food courts.

It is likely that as a subsidiary of Autogrill, the company will continue its strategy of trying to increase its presence in malls, analysts and company officials said.

Host Marriott Services' reach -- particularly its dominance at airports -- attracted Autogrill, said Luciano Luffarelli, the Milan company's external relations manager.

"There's always been the idea of doing something together," Luffarelli said. "The two companies are complementary. They do the same job in completely different geographic areas. From the union comes a very strong group in the commercial catering business. This can give to both companies new strength for future development in the states and in Europe."

Autogrill, with annual sales of $1.2 billion and more than 12,000 employees, primarily runs highway rest stops in Italy and other parts of Europe. Autogrill, listed on the Milan stock exchange and majority owned by the family that owns the Benetton retail chain, runs 636 restaurants and bars in nine European countries.

Its empire includes the Autogrill highway rest-stop chain, the Spizzico fast-food pizza chain, the Ciao self-service restaurant chain, and the Italian franchise for Burger King.

Gilberto Benetton, chairman of Autogrill, and Edizione Holding, majority owner of Autogrill, said in a statement that the "acquisition is an important strategic step in positioning the company for success in a business that is becoming increasingly global."

The Italian company began expanding internationally in 1993 and accelerated the pace of acquisitions two years ago. Since then, it has spent nearly $370 million acquiring highway rest-stop chains and, more recently, a French operator of railway station restaurants. The company operates restaurants in only a few airports.

"We felt ready to go beyond that," he said. "In Europe, there is not that much to buy, actually."

Pub Date: 7/27/99

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