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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 16, 1999
PEGASUS SYSTEMS, INC.
(Exact name of registrant as specified in charter)
Delaware 000-22935 75-2605174
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
3811 Turtle Creek Boulevard
Suite 1100
Dallas, Texas 75219
(Address of principal executive offices)
(214) 528-5656
(Registrant's telephone number, including area code)
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Item 5. Other Events.
On November 16, 1999, Pegasus Systems, Inc., a Delaware corporation
("Pegasus") and its wholly owned subsidiary Pegasus Worldwide, Inc., a Delaware
corporation ("PWI"), entered into an Agreement and Plan of Merger (the "Merger
Agreement") with REZ, Inc., a Delaware corporation ("REZ"), Reed Elsevier Inc.,
a Massachusetts corporation ("Reed Elsevier"), and Utell International Group,
Ltd., a corporation organized under the laws of England and Wales ("Utell"),
pursuant to which PWI will merge with and into REZ, with REZ being the surviving
corporation (the "Merger"). After the Merger, REZ will operate as a wholly owned
subsidiary of Pegasus.
In the Merger, the stockholders of REZ will be entitled to receive an
aggregate of 2.66 million shares of Pegasus common stock, $115 million in cash
and a $20 million note payable to Utell, in lieu of cash consideration otherwise
receivable by Utell, subject to closing balance sheet adjustments and post
closing escrow arrangements. No fractional shares will be issued and in lieu
thereof, REZ stockholders will receive a cash payment for any fractional shares.
Consummation of the Merger is expected to occur in the first quarter of 2000,
subject to certain conditions including the effectiveness of certain filings
with the Securities and Exchange Commission and the expiration or termination of
the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits
99.1 Press Release, dated November 17, 1999.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
PEGASUS SYSTEMS, INC.
Date: November 22, 1999 By: /s/ Jerome L. Galant
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Jerome L. Galant
Chief Financial Officer
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EXHIBIT INDEX
<TABLE>
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Exhibit
No. Description
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<S> <C>
99.1 Press Release, dated November 17, 1999.
</TABLE>
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COMPANY PRESS RELEASE
SOURCE: Pegasus Systems, Inc.
PEGASUS SYSTEMS, INC. TO ACQUIRE LEADING PROVIDER OF RESERVATIONS SYSTEMS AND
SERVICES TO THE HOSPITALITY INDUSTRY
REZSOLUTIONS, INC. ACQUISITION WILL POSITION PEGASUS AT THE HUB OF
BUSINESS-TO-BUSINESS E-COMMERCE BETWEEN THE HOTEL INDUSTRY AND ITS WORLDWIDE
SALES CHANNELS
DALLAS, Nov. 17 /PRNewswire/ -- Pegasus Systems, Inc. (Nasdaq: PEGS - news), a
leading worldwide provider of hotel industry transaction processing and
electronic commerce services, today announced the signing of a definitive
agreement to acquire Phoenix-based REZsolutions, Inc., a leading provider of
reservation technology systems and representation services to the hotel
industry. This acquisition will enable Pegasus to offer hotels and travel agents
a much broader product line, and greatly strengthens Pegasus' presence in Europe
and the Asia Pacific.
Under the terms of the agreement, Pegasus Systems will issue 2.66 million shares
of common stock, pay $115 million in cash and agree to a $20 million note
payable to Utell International Ltd., a subsidiary of Reed Elsevier, plc, the
majority stockholder in REZsolutions, subject to certain closing balance sheet
adjustments. Based on Pegasus' closing price on Tuesday, November 16, 1999, the
transaction is valued at approximately $250 million after anticipated
adjustments. The acquisition, expected to close in the first quarter of 2000,
will be accounted for using the purchase method of accounting and is subject to
usual and customary conditions. On a pro-forma basis for 1999, the combined
company will have estimated revenues of $180 million and an employee base of
more than 2,100 located in more than 50 offices in 39 countries.
"We believe this acquisition will transform Pegasus into the leading technology
solutions company for the hotel industry worldwide," said John F. Davis III,
president and chief executive officer of Pegasus Systems.
"The transaction is complementary in that we share a common customer base of
hotels and travel agents, and additive in that REZsolutions gives the new
company an international presence and access to new technologies, customers and
a worldwide infrastructure. We are excited about the opportunities to enhance
our service offerings to our current customers, in addition to the substantial
increase to our customer base and the prospect of significant revenue and cash
flow growth, which should benefit our shareholders well into the future," Mr.
Davis said.
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Page 2 of 3
An established, well-known company within the hospitality industry, REZsolutions
has a fully integrated portfolio of hotel industry information technology
products and services, including central reservation systems, a property
management system, hotel and brand representation, commission processing
services and global reservations distribution through call centers, global
distribution systems (GDS) such as Sabre and Galileo, as well as the Internet.
REZsolutions' core asset is its central reservation system (CRS), which is
utilized by more than 80 hotel brands to make reservations at more than 25,000
hotels around the world. The combination of services will position Pegasus as a
total solution provider for reservations distribution, whether electronic or
voice, for independent properties as well as for worldwide chains.
Mr. Davis stated, "The combination of REZsolutions' independent hotel customer
base, reservation system and international sales force with Pegasus' leadership
in e-commerce capabilities will position the new Pegasus as a leader in the
worldwide business-to-business electronic commerce arena. The union of these two
companies will create a powerful international force that will provide critical
end-to-end reservation distribution solutions to the hotel industry. Together,
we will offer the most comprehensive array of value-added services to our
combined customer base, which is relatively unmatched in worldwide depth and
breadth.
"The new Pegasus Systems will have an established international presence with
sales and account management teams located around the world, providing us with
substantial opportunities to expand upon our technology and product solutions
internationally. We will be able to reach and introduce our services to more
than 7,700 hotels worldwide, ranging from independent hotels to small- to
medium-sized international hotel chains, a segment that Pegasus has had limited
success in penetrating," Davis said. "This transaction creates a powerful new
company, uniquely positioned to offer solutions across the entire spectrum of
the hotel industry."
Following the completion of the acquisition, Mac Highet, President and CEO of
REZsolutions will join Pegasus' management team, serving as Pegasus Systems'
Chief Operating Officer. Mr. Highet brings extensive knowledge of the
hospitality and travel industry through prior management positions within Reed
Elsevier, the parent company of Cahners Travel Group.
Mr. Highet said, "REZsolutions brings a wealth of industry knowledge and
technologies that complements and enhances Pegasus' central position in the
electronic commerce transaction flow between the consumer, travel agents, GDS,
Internet travel sites, corporate travel managers, convention and visitors
bureaus and 32,000 hotels worldwide. The combination of these two industry
leaders extends the new Pegasus Systems internationally and into new market
segments and presents considerable opportunities to build upon this critical
position and to leverage our core competencies. Moreover, Pegasus' online
distribution service can now leverage our sales force and existing customer
base, positioning the new company to provide Internet reservations capabilities
and establish individually branded Web sites for REZsolutions' customers."
REZsolutions, Inc. was formed with the 1997 merger of Utell International and
Anasazi, Inc., which commenced operations in 1930 and 1979, respectively. Utell,
one of the world's leading hotel reservations and marketing companies with a
long-standing presence in Europe and Asia, merged with Anasazi, a leading
supplier of technology-based solutions to the global hospitality industry, to
offer a comprehensive portfolio of marketing services to hotels through its
hotel representation business. Through this service, independent hoteliers gain
access to global electronic reservations, both GDS and Internet, and a variety
of other solutions to market their properties to the travel agent trade
worldwide.
Mr. Davis concluded, "As we've said in the past, we have been exploring
strategic growth opportunities to complement Pegasus' core technology and
solutions competencies. We have fully evaluated the industry landscape and
believe this transaction will be of great benefit to our customers and
employees, as well as our shareholders. We are extremely enthusiastic about the
new position
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Page 3 of 3
that Pegasus Systems will hold within the hotel industry and are dedicated to
continuing to serve the technology and distribution needs of hoteliers and
travel agents worldwide."
Although the company expects the transaction to be accretive on a cash EPS
basis, it is anticipated that due to the amortization of intangibles associated
with the purchase accounting treatment of this acquisition, the company will
report losses and anticipates that the purchase accounting charges will be
dilutive for the next several years. However, Pegasus anticipates that the
combination will produce positive and growing cash flow and EBITDA as a result
of its strong position in the markets it serves and the synergies and revenue
opportunities it expects to capitalize on as a result of this acquisition.
Company Information
REZsolutions, Inc. (http://www.rez.com) is the leading provider of distribution
systems and solutions for the hospitality industry. The company offers a
comprehensive portfolio of products, global access and representation support to
independent hotels, management companies, hotel owners and developers.
REZsolutions' global network of more than 50 offices and 2,000 employees touches
more than 3 million rooms, 25,000 hotels and 80 brands worldwide. In addition to
its corporate headquarters in Phoenix, Arizona, REZsolutions operates regional
business centers in New York, London and Singapore.
Dallas-based Pegasus Systems (http://www.pegsinc.com) provides electronic
commerce and transaction processing solutions to the hotel industry and operates
its own consumer travel reservations site, TravelWeb.com
(http://www.travelweb.com). The Company is the premier electronic switching
service for reservations processing, which allows central reservation systems to
connect seamlessly to global distribution systems (GDS) and/or to the Internet
with a single electronic interface. Pegasus Commission Processing is the largest
provider of travel agent commission payment processing services and also
provides data mining and database marketing consulting services through its
Pegasus Business Intelligence service. Pegasus' customers include seven of the
10 largest U.S.-based travel agencies, as well as approximately 32,000 hotel
properties around the world. Pegasus generated revenue of $27.6 million for the
first nine months of 1999.
This news release contains statements relating to future results, including
future operations of Pegasus Systems, which are forward-looking statements
regarding future events and the future financial performance of the company and
for which no assurances can be made. Actual results may differ materially from
those projected as a result of certain risks and uncertainties associated with
the proposed acquisition and its impact on the Company's future financial
performance as well as the risks and uncertainties detailed in the Company's
periodic reports and registration statements filed with the Securities and
Exchange Commission.
Pegasus Systems, Inc. disclaims any proprietary interest in the trademarks or
names of unrelated companies listed.
SOURCE: Pegasus Systems, Inc.
