sec document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[X] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
PRIME HOSPITALITY CORP.
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(Name of Registrant as Specified In Its Charter)
N/A
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(Name of Person(s) Filing Proxy Statement, if Other Than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (Set forth the amount on
which the filing fee is calculated and state how it was
determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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THIS FILING CONSISTS OF A TRANSCRIPT OF A CONFERENCE CALL HELD BY PRIME
HOSPITALITY CORP. (THE "COMPANY") ON AUGUST 19, 2004.
Certain statements and information included in this document
constitute "forward-looking statements" within the meaning of the Federal
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance, or achievements of the Company
to be materially different from any future results, performance or achievements
expressed or implied in such forward-looking statements. Additional discussion
of factors that could cause actual results to differ materially from
management's projections, forecasts, estimates and expectations is contained in
the Company's SEC filings.
In connection with the proposed merger, the Company will file a proxy
statement with the Securities and Exchange Commission. INVESTORS AND SECURITY
HOLDERS ARE ADVISED TO READ THE PROXY STATEMENT WHEN IT BECOMES AVAILABLE,
BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION. Investors and security holders
may obtain a free copy of the proxy statement (when available) and other
documents filed by the Company at the Securities and Exchange Commission's web
site at www.sec.gov. The proxy statement and such other documents may also be
obtained for free from the Company by directing such request to the Company,
Attention: Rich Szymanski, Chief Financial Officer, 700 Route 46 East,
Fairfield, NJ 07004, Telephone: (973) 808-7751.
The Company and its directors, executive officers and other members of
its management and employees may be deemed to be participants in the
solicitation of proxies from its shareholders in connection with the proposed
merger. Information concerning the interests of the Company's participants in
the solicitation is set forth in the Company's proxy statements and Annual
Reports on Form 10-K previously filed with the Securities and Exchange
Commission, and in the proxy statement relating to the merger when it becomes
available.
CORPORATE PARTICIPANTS
A.F. PETROCELLI
PRIME HOSPITALITY CORP., CHIEF EXECUTIVE OFFICER
RICH SZYMANSKI
PRIME HOSPITALITY CORP., CHIEF FINANCIAL OFFICER
CONFERENCE CALL PARTICIPANTS
MICHAEL JOHNSON
SOROS FUND MANAGEMENT, ANALYST
WILLIAM A. CROW
RAYMOND JAMES, VICE PRESIDENT REAL ESTATE EQUITY RESEARCH
THOMAS M. O'BRIEN
REIT MANANGEMENT AND RESEARCH, LLC
RMR ADVISORS, INC., PRESIDENT
PATRICE KANADA
GUARD HILL CAPITAL, ANALYST
HENRY CHU
FIRST CAPITAL ALLIANCE, ANALYST
LUCA IPPOLITO
CHESAPEAK PARTNERS, ANALYST
SCOTT KIM
CARGILL INVESTORS SERVICES
DING CHUN
FARALLON CAPITAL, ANALYST
SAM SABBAGH (REPRESENTED BY S.T. TALLAPRAGADA)
QUATTRO GLOBAL CAPITAL, PORTFOLIO MANAGER
PRESENTATION
OPERATOR: Hello everyone we are now beginning the conference call.
All lines are to be muted during the presentation. Afterwards there will be an
opportunity to ask questions. Instructions will be provided at that time. At
this time I would like to turn the conference over to Mr. Petrocelli. Please go
ahead, sir.
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MR. PETROCELLI: Thank you. Welcome, everyone.
We are pleased to announce that Prime Hospitality signed a definitive
agreement to be acquired by the Blackstone Group for $12.25 per share in cash.
While we are optimistic about the future business prospects of the Company, we
believe that the $12.25 per share offer price and the implied premium are in the
best interest of our shareholders.
The Board of Directors approved the merger agreement in a special meeting
yesterday, at which Bear Stearns rendered a fairness opinion to the Board. The
transaction is subject to stockholder approval and certain other limited
customary conditions and is expected to be completed during the fourth quarter
2004.
Both Prime Hospitality Corp. and The Blackstone Group want to close the
transaction as quickly as possible. The merger agreement will be filed shortly
but we want to highlight a number of key provisions in the agreement. The
agreement contains limited customary closing conditions including stockholder
approval. Blackstone has secured a financing commitment from Bank of America.
The agreement provides that in certain circumstances a $23 million termination
fee plus up to $4 million of expense reimbursement would be payable by the
Company to Blackstone and that Blackstone would pay the Company $27 million if
the agreement is terminated in certain other circumstances. Additional detail
will be set forth in the merger agreement, which I repeat will be filed shortly
and available to each of you.
All of the Company's bank debt will be repaid at closing. The Company
intends to solicit consents and commence a tender offer for our existing senior
subordinated notes prior to closing. However, such consent solicitation and
tender offer has not been commenced and will be distributed to note holders.
Details on the terms of the consent and tender offer will be made available in
due course.
We are pleased to report that Blackstone plans to maintain the headquarters
operations of Prime Hospitality Corp in Fairfield, NJ. Transition plans between
Blackstone and Prime Hospitality Corp. are currently underway, and we look
forward to working together during this transition period. While there will be
likely some changes in staffing, the parties anticipate that members of Prime
Hospitality Corp. existing management team and employees will play a significant
role in the management of the Company going forward.
On a more personal note, I want to thank all of our employees and leaders
who have built this Company into such a formidable hotel operation, and whom I
believe will continue to build on the success of our operations well into the
future. I would also like to thank our investors, you and stockholders, who have
supported our efforts over time, and I trust you will be pleased with the terms
of this transaction. I have with me Rich Szymanski, our CFO, for any questions
that you might have. Let's open up to questions.
Thank you very much.
QUESTION AND ANSWER
OPERATOR: If at this time you would like to ask a question, please
press star and then one on your touchtone phone. Your questions are answered in
the order received. If you have a question and you no longer wish to ask your
question simply press star and then nine.
Your first question is from Mike Johnson of Soros Fund Management.
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MIKE JOHNSON: Could you give a review of the termination fee, you just
mentioned, I didn't catch all of that.
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MR. SZYMANSKI: Under certain circumstances the company would be required
to pay Blackstone a termination fee of $23 million plus up to four million
dollars of expense reimbursement and Blackstone would be required to pay Prime
$27 million if the transaction wasn't consummated due to certain circumstances.
More details will be in the merger agreement.
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MIKE JOHNSON: Could you give me more details under what situation
Blackstone has to pay $27 million?
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MR. PETROCELLI: If they don't close.
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MIKE JOHNSON: In the last deal that Blackstone did, the Extended Stay
deal, there was liquidated damages clause, is there anything like that in this
deal?
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MR. SZYMANSKI: Well the termination fee that we just outlined is the fee
for not closing.
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MIKE JACKSON: Ok. Thank you.
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OPERATOR: Your next question is from Bill Crow of Raymond James.
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BILL CROW: Good morning guys. A couple of questions. First of all
could you just step back in time and tell us how this deal came together? Were
you approached by Blackstone or did you approach Blackstone? We'll start there.
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MR. PETROCELLI: Blackstone has been looking at our company for a while now
and we didn't solicit offers but we've always entertained offers. Does that
answer your question, Bill?
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BILL CROW: When did you enter more formal negotiating, if you could
give us that time line maybe?
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MR.PETROCELLI: About three or four weeks ago.
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BILL CROW: Three or four weeks ago. Until now, you know, going back
several years now, you've used the conference call, the quarterly conference
call, to highlight the value you believed was inherent in the company and often
times according to a book value you know often in the mid teens range. Could you
talk about the $12.25 price and how you determined that, that was fair for
shareholders as well as represented a value you believed was inherent in the
company?
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MR.PETROCELLI: Sure. Well, our book value is somewhere north of $12.25. We
believe that the offer represents a premium to what individual assets of the
company actually traded in the private market, in today's market place.
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BILL CROW: So could you expand on that a little bit. What on a per key
basis, if we give no value for the franchise, we come up with 43.44 thousand per
key. Could you talk about what your calculation looks like and how that
represents a premium to the value of those assets given and how many of them
were just built recently?
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MR.PETROCELLI: It was a few years ago. We haven't built anything recently.
We haven't built anything in the last few years. But if you look at it in an
EBITDA basis, I think we are getting a very fair value.
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BILL CROW: So the 10.9 multiple, just that I am trying to understand
whether it was EBITDA value, so it was made to go multiple as opposed to the
value of the key or could you tell me that it was the $12.25 that represented
the good value. I don't want to pound you on this, but I'm just trying to get
inside your mind?
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MR.PETROCELLI: Why do you want to be different today than any other day?
It was really EBITDA that we looked at, Bill.
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BILL CROW: Ok, the 10.9 multiple, ok.
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MR.PETROCELLI: Thanks.
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BILL CROW: Thanks Attilio.
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OPERATOR: Your next question is from Dwayne Kenmore of First Capital
Alliance. Your line is open, sir. Dwayne Kenmore?
Your next question will come from Tom O'Brien of RMR Advisors.
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TOM O'BRIEN: Hi guys. Can you give me a sense of when we may hear some
more about the terms of the tender offer for the senior sub debt?
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MR. PETROCELLI: As quickly as they can get it done. I would imagine it
would be in the next few weeks.
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TOM O'BRIEN: Thanks.
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OPERATOR: Your next question is from Patrice Kanada of Guard Hill
Capital.
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PATRICE KANADA: Hi I just wanted to know which specific regulatory
approvals will be required, does it include Hart Scott Rodino?
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MR.PETROCELLI: We don't think so, but the SEC has to review it.
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PATRICE KANADA: Ok and the bond tender condition, is it a condition of
closing of the merger?
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MR.PETROCELLI: Yes.
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PATRICE KANADA: Ok, thank you.
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OPERATOR: Your next question comes from Henry Chu of First Capital.
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HENRY CHU: Yes I have a question concerning the process of selling the
company. I'm surprised that there wasn't a strategic buyer. Can you maybe expand
a little as to perhaps why there wasn't more interest from those kinds of
parties?
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MR.PETROCELLI: I don't know. I don't know why there wasn't more interest.
I think in the proxy statement we'll get more details of who we spoke to and
when we spoke to them and so we have to wait for the proxy statement to be
filed.
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HENRY CHU: Ok, thank you.
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MR. PETROCELLI: Thank you.
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OPERATOR: Your next question comes from Luca Ippolito with Chesapeake
Partners.
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LUCA IPPOLITO: Hi, I was wondering if there is a terrorism or war out
relating to the financing of the transaction.
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MR. PETROCELLI: All of those details will be in the proxy statement but
there is no financing contingency, I will tell you that.
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LUCA IPPOLITO: Ok.
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OPERATOR: Again for questions, please press star one on your
touchtone phone. Your next question comes from Scott Kim of Cargill Investment.
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SCOTT KIM: Hi, thank you. Could you guys talk about how much synergy
you guys modeled out in terms of evaluation, how much Blackstone modeled out?
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MR. PETROCELLI: No we can't. We don't know what Blackstone did to their
model.
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SCOTT KIM: Ok, how about you guys, do you have any idea of how much,
you guys probably know, in terms of what cost is taken out, or whether its top
line or what is off savings?
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MR. PETROCELLI: We don't know.
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SCOTT KIM: You don't know. Ok. Could you also comment on how much the
Bank of America is committed to the financing and how much is being financed
with debt and equity?
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MR. SZYMANSKI: Blackstone has secured a mortgage from the Bank of America
of $680 million.
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SCOTT KIM: Ok
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MR. SZYMANSKI: And they've delivered an equity commitment for $172
million.
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SCOTT KIM: Ok. And are there any major hurdles in terms of the
commitment letter? Whether some EBITDA hurdle until closing, or the amount you
expect to reach the next quarter before the deal closes.
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MR. PETROCELLI: We expect the deal to close in November.
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SCOTT KIM: Ok, thank you.
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OPERATOR: Your next question comes from Ding Chun of Farallon.
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DING CHUN: Hi sorry about that. Would you please reiterate the comment
"terrorism out" I missed that, I apologize.
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MR. SZYMANSKI: There is a condition that a severe market disruption shall
not have occurred in order for the closing to happen. If you need more details
that will be in the merger agreement.
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DING CHUN: Thank you very much.
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OPERATOR: Your next question comes from Sam Babbagh of Quattro Global
Capital.
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S.T. TALLAPRAGADA: Hi, it's S.T. Tallapragada for Sam Sabbagh.Can you just go
through, you said that there is no financing contingency, so in other words, are
there any other tests on financing at all or is it just that they have a
commitment and they have to show up with all of the financing not subject to any
outs?
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MR.PETROCELLI: I believe that that is the case, it's not subject to any
outs.
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S.T. TALLAPRAGADA: Ok, so there are no other ratings or ratios tests or other
conditions aside from the severe market disruption that you mentioned.
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MR.PETROCELLI: Not that I know of.
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S.T. TALLAPRAGADA: Ok. Great. Thank you.
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OPERATOR: Your next question comes from Tom O'Brien, RMR Advisors.
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TOM O'BRIEN: Hi guys. For a follow-up who bears the risk of a failure of
that tender offer for the senior sub debt, you or Blackstone?
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MR. PETROCELLI: Not selling to Blackstone. Not tendering?
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TOM O'BRIEN: Presumably you have to get in all of the bonds to
consummate the deal.
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MR. PETROCELLI: Blackstone.
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TOM O'BRIEN: Blackstone bears that risk?
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MR. PETROCELLI: Yes.*
*Clarification: Mr. Petrocelli's answer was referring to Blackstone's agreement
to bear the expenses of the tender and consent solicitation, but it is a
condition of the closing of the merger that the consent solicitation is
successfully completed.
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TOM O'BRIEN: Ok, thanks.
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OPERATOR: At this time we have no further questions.
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MR. PETROCELLI: Thank you all. Appreciate it. Have a great day.
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