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Dueling 'paired-shares'?
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November 26, 1997: 11:40 a.m. ET
Patriot American, Interstate Hotels in talks amid competing Meditrust bid
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NEW YORK (CNNfn) - Patriot American Hospitality Inc. is in merger talks with Interstate Hotels Corp., the nation's largest independent hotel management company, CNNfn has learned.
"The companies have talked to each other. We're looking at opportunities all over to grow," a person familiar with the situation said.
The source indicated, though, that no deal is imminent.
The price tag for Pittsburgh-based Interstate will likely need to exceed the estimated $1.3-billion bid put forward last week by Meditrust Corp., the nation's largest health care real estate investment trust and one of four REITs that operates under the "paired-share" tax structure.
Interstate, thus far, has publicly neither confirmed nor denied the talks. Yet, people familiar with the company said its financial books are available for due diligence review by potential suitors. Interstate did not return phone calls seeking comment on Patriot American's interest.
Patriot American, a Dallas-based REIT and another so-called "paired-share" company, has recently been on a buying binge. In April, the REIT agreed to merge with Wyndham Hotel Corp. and since then has announced several smaller deals such as Gencom American Hospitality and Carnival Hotel Resorts.
If a bidding war erupts, the process would be an opportunity to examine the real leverage of the unique "paired-share" tax structure, pitting two REITs against each other.
Many people in the financial community believe the unique tax status gave Starwood Lodging Trust a distinct advantage in the highly publicized battle with Hilton Hotels Corp. for ITT Corp.
The "paired-share" structure was created by the Tax Reform Act of 1984 and permits those four REITs to both own and manage their properties, thereby lowering their corporate tax obligations.
-- by staff writer Robert Liu
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