Doubletree To Pay $1.2 Billion For Red Lion

VANCOUVER, Wash. - Doubletree said it agreed to buy Red Lion Hotels for $1.2 billion in cash, stock and debt, helping expand its luxury-hotel chain into a national brand.

The combination would create a hotel chain with more than 230 locations in 39 states and Mexico. The combined company would have 56,000 rooms and annual revenue of $600 million.

Most of the hotels will be operated under the Doubletree name, and the entire chain will share a reservation system.

The price is slightly more than the $1.15 billion that analysts expected when news of a possible purchase first surfaced two weeks ago. Red Lion's shares have risen 22 percent since then.

The move comes about 13 months after Red Lion sold shares to the public for the first time for $19 each. Vancouver, Wash.-based Red Lion owns or operates 56 U.S. hotels, mainly in the West.

The terms of the purchase value Red Lion at $30.11 a share, or a 4.7 percent premium above yesterday's close of $28.75. Each share will be exchanged for $21.30 in cash and $8.81 in Doubletree stock, or 0.2398 shares of Doubletree.

The purchase has already been approved by a limited partnership that controls about 67 percent of Red Lion's shares. The limited partnership is made up of Kohlberg Kravis Roberts & Co., Red Lion founder Tod McClaskey and the state pension funds of Oregon and Washington.

Doubletree's co-chairmen, Richard Ferris and Peter Ueberroth, the former commissioner of Major League Baseball, control about 39 percent of Doubletree's stock along with General Electric Investments.

Under the terms of the transaction, Doubletree will issue $100 million of common stock to General Electric Investments, $280 million in stock to Red Lion shareholders and $600 million of institutional debt. Doubletree also said it plans an equity offering for an undisclosed amount and has received commitments for the cash portion of the purchase.

Red Lion Inns, a separately traded limited partnership not involved in the purchase, owns 10 Red Lion hotels that will be managed by the combined company. Phoenix-based Doubletree manages the Doubletree Hotels, Doubletree Guest Suites and Club Hotels by Doubletree chains.