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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): October 31, 1996
BAY MEADOWS OPERATING
CALIFORNIA JOCKEY CLUB COMPANY
(Exact name of registrant (Exact name of registrant
as specified in its charter) as specified in its charter)
Delaware Delaware
(State of Incorporation) (State of Incorporation)
001-9319 001-9320
(Commission File Number) (Commission File Number)
94-0358820 94-2878485
(IRS Employer Identification (IRS Employer Identification
Number) Number)
2600 South Delaware Street 2600 South Delaware Street
San Mateo, California 94403 San Mateo, California 94403
(Address of principal (Address of principal
executive offices) executive offices)
(415) 573-4514 (415) 573-7223
(Registrant's telephone (Registrant's telephone
number, including area code) number, including area code)
(former name or address, (former name or address,
if changed since last report) if changed since last report)
Total Pages 7
Index to Exhibits appears on page 4 herein
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Item 5. Other Events.
On October 31, 1996, California Jockey Club ("Cal Jockey") and Bay
Meadows Operating Company ("Bay Meadows") entered into a binding Acquisition
Agreement (the "Agreement") with Patriot American Hospitality, Inc. ("Patriot").
The shares of Cal Jockey and Bay Meadows are paired and trade as a single unit
on the American Stock Exchange. The Agreement contemplates that Patriot will
acquire Cal Jockey and Bay Meadows for $33.00 in cash for each paired share
which is tendered in the process described below and that those Cal Jockey and
Bay Meadows stockholders who do not elect to tender their shares will continue
to hold, for each untendered paired share, the equivalent of 0.9635 shares of
today's Patriot.
The Agreement, which is subject to Cal Jockey, Bay Meadows, and Patriot
stockholder approval, provides for the merger of Patriot with and into Cal
Jockey by way of a number of related transactions (the "Transactions"): (1)
Patriot will enter into a subscription agreement to purchase for cash a number
of shares of Bay Meadows stock ("Bay Meadows Subscribed Shares") equal to the
number of shares of Cal Jockey stock to be issued to Patriot stockholders when
Patriot merges with and into Cal Jockey (the "Merger"); (2) simultaneous with
the mailing of the proxy statement related to the Merger, Cal Jockey and Bay
Meadows will commence a self-tender offer to permit each of their stockholders
to tender their paired shares at an aggregate price of $33.00 per paired share
in cash (financed by the subscription agreement referenced in clause (1) above
and by a loan from Patriot or one of its affiliates); (3) immediately following
the consummation of the tender offer, Patriot will merge with and into Cal
Jockey, with Cal Jockey the surviving corporation. In connection with the
Merger, Patriot stockholders will receive Cal Jockey stock that will be
distributed and paired with Bay Meadows Subscribed Shares at the ratio of 1.0379
paired shares for each share of Patriot held at the effective time of the
Merger, with the result that each paired share of Cal Jockey and Bay Meadows
retained by their stockholders and not tendered for cash will represent the
equivalent of 0.9635 shares of Patriot at the effective time of the Merger. The
Boards of Directors of each of Cal Jockey and Bay Meadows will resign effective
as of the Merger, and provisions will be made for the nomination and election of
each Board by nominees selected by Patriot. Consummation of the Merger is not
conditioned upon a diligence investigation by any party.
Cal Jockey and Bay Meadows agreed to terminate any third party
discussions or negotiations relating to an acquisition proposal and further
agreed not to take any action to (i) encourage, solicit or initiate the
submission of any acquisition proposal, (ii) enter into any agreement for a
third party transaction, or (iii) participate in any way in discussions or
negotiations with, or furnish any non-public information to, any person in
connection with any acquisition proposal. Notwithstanding the foregoing, Cal
Jockey or Bay Meadows may, in response to an unsolicited bona fide offer or
proposal made by a third party to it, provide information to or have discussions
or negotiations with such third party to the extent required by the fiduciary
obligations of their respective Board of Directors. With respect to terminating
Cal Jockey's Formation Agreement with Hudson Bay Partners, L.P. ("Hudson Bay"),
dated August 18, 1996, Patriot agreed to loan to Cal Jockey the $2.9 million
termination fee due to Hudson Bay under the terms of the Formation Agreement,
which shall be payable within 180 days and shall accrue interest at the rate of
5% per annum. This $2.9 million loan is immediately repayable to Patriot if the
Agreement is terminated.
In the event the Agreement is terminated because of (i) a breach of
Patriot's representations and warranties that would have a material adverse
effect on Patriot or (ii) a failure to obtain Cal Jockey, Bay Meadows or Patriot
stockholder approval, Patriot shall pay to Cal Jockey $2.9 million or such
lesser amount requested by Cal Jockey and Bay Meadows (which amount Cal Jockey
shall repay to Patriot if prior to twelve months following any such termination
on account of a failure to obtain Cal Jockey or Bay Meadows stockholder
approval, Cal Jockey or Bay Meadows enters into a binding acquisition agreement
with a third party). Further, if Patriot's Board of Directors withdraws or
modifies its approval or recommendation of the Transactions, or Patriot's
stockholders fail to approve them, Patriot shall promptly reimburse Cal Jockey
and Bay Meadows for their out-of-pocket costs and expenses incurred in
connection with the Agreement and the related transactions, in an amount
requested by Cal Jockey and Bay Meadows up to $1.0 million in the aggregate.
In the event the Agreement is terminated (i) because of a
failure to obtain Cal Jockey or Bay Meadows stockholder approval and prior to
twelve months following such termination Cal Jockey or Bay Meadows enters into a
binding acquisition agreement with a third party or (ii) at the option of Cal
Jockey or Bay Meadows because either of their respective Boards of Directors
determines such action is necessary to comply with its fiduciary duties to
stockholders under applicable laws, then Cal Jockey or Bay Meadows, as the case
may be, shall pay to Patriot $5.0 million in immediately available funds. In the
event the Agreement is terminated by Patriot because the Board of Directors or
any committee of either Cal Jockey or Bay Meadows (i) withdraws or modifies its
approval or recommendation of the Agreement (or the implementation agreements)
or the Transactions, (ii) fails to recommend that the stockholders of Cal Jockey
and Bay Meadows vote in favor of the Transactions, (iii) approves or recommends
an acquisition agreement with a third party, or (iv) resolves to do any of the
foregoing, Cal Jockey and Bay Meadows shall pay to Patriot $5.0 million in
immediately available funds or with a note due within 90 days accruing interest
at 7% per annum.
A copy of the Joint Press Release of Cal Jockey, Bay Meadows and
Patriot dated October 31, 1996 is attached hereto as Exhibit 99.1 and is
incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(c) The following exhibit is filed as part of this Report:
99.1 Joint Press Release of California Jockey Club, Bay
Meadows Operating Company and Patriot American
Hospitality, Inc. dated October 31, 1996.
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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 hereunto duly authorized.
Dated: November 5, 1996
CALIFORNIA JOCKEY CLUB BAY MEADOWS OPERATING COMPANY
By: /s/ Kjell H. Qvale By: /s/ F. Jack Liebau
------------------------------- --------------------------------
Name: Kjell H. Qvale Name: F. Jack Liebau
Title: Chairman of the Board Title: President
and Secretary
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EXHIBIT INDEX
Exhibits.
99.1 Joint Press Release.
4
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Exhibit 99.1
Patriot American Hospitality, Inc.
3030 LBJ Freeway, Suite 1500
Dallas, TX 75234
NYSE: PAH
Bay Meadows Operating Company California Jockey Club
2600 South Delaware Street 2600 South Delaware Street
P.O. Box 5050 P.O. Box 1117
San Mateo, California 94402 San Mateo, California 94402
AT THE PATRIOT AMERICAN: AT THE FINANCIAL RELATIONS BOARD:
- ----------------------- --------------------------------
Paul Nussbaum Bess Gallanis Clair Koeneman Bob Schwaller
Chairman & CEO Media Inquiries Analyst Inquiries General Inquiries
972-888-8000 212-661-8030 312-640-6784 972-888-8087
AT CALIFORNIA JOCKEY CLUB AND BAY MEADOWS OPERATING COMPANY:
- -----------------------------------------------------------
Kjell Qvale Jack Liebau,
Chairman, California Jockey Club President/CEO, Bay Meadows
415-776-7700 415-573-4505
PATRIOT AMERICAN HOSPITALITY AGREES TO ACQUIRE
CALIFORNIA JOCKEY CLUB AND BAY MEADOWS OPERATING COMPANY FOR
$33.00 PER SHARE IN CASH OR STOCK;
TRANSACTION WILL MAKE PATRIOT A "PAIRED SHARE" REIT
DALLAS, TEXAS AND SAN MATEO, CALIFORNIA, October 31, 1996 -- Patriot American
Hospitality, Inc. (NYSE: PAH), California Jockey Club and Bay Meadows Operating
Company (ASE: CJ) jointly announced today that they had entered into a binding
agreement for Patriot American to acquire California Jockey Club and Bay
Meadows for $33.00 per paired share in cash or .9635 shares of Patriot, which
closed Oct. 30, 1996 at $34.25. The shares of California Jockey Club, a real
estate investment company, and Bay Meadows, a real estate management and
operating company (together, "Cal Jockey and Bay Meadows"), are paired and
trade as a single unit. Based on approximately 5.9 million fully diluted paired
shares of Cal Jockey and Bay Meadows outstanding, the acquisition is valued at
approximately $195 million.
The acquisition agreement was approved unanimously by the Boards of Patriot
American, California Jockey Club and Bay Meadows and is subject to approval by
the shareholders of Patriot American and the paired shareholders of Cal Jockey
and Bay Meadows.
In connection with the transaction, Patriot American will merge into California
Jockey Club and thereby assume Cal Jockey/Bay Meadows' unique "paired share"
ownership structure. This
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structure, which was permitted by tax law until the early 1980s, pairs the
shares of a real estate investment trust (REIT) with an operating company and,
in the case of hotel REITs, allows shareholders to realize the economic
benefits of hotel management, while maintaining the benefits of REIT tax
status. Cal Jockey and Bay Meadows is one of only four companies in the United
States that are grandfathered under U.S. tax law and continue to use this
structure.
By assuming the paired share structure, Patriot American will have the ability
to lease newly acquired hotels to its own paired operating company and thus
obtain, for the benefit of Patriot's shareholders, greater cash flow from the
acquired assets. At the same time, Patriot will also have the flexibility to
work with its independent lessees to aggressively expand its portfolio.
"This acquisition represents a major strategic step forward for Patriot
American," said Paul A. Nussbaum, Patriot's chairman and CEO. "The paired share
structure provides Patriot American with multiple options for growth and
greater flexibility in acquiring hotel assets. The structure will allow
Patriot to be even more competitive in the acquisition arena and increase
shareholder value through hotel management profits."
"There are only two self-advised 'conflict-free' hotel REIT structures
operating today," said Nussbaum. "Each helps ensure, in different ways, that
shareholders receive the maximum return on their REIT investment. One structure
is our innovative independent multi-tenant structure, which leverages the
acquisition skills, niche expertise, and management skills of multiple hotel
operating companies. The second structure, the 'paired share,' allows investors
to benefit directly from both the REIT's ownership of hotels and the management
operations of the properties. Upon completion of this transaction, Patriot
American and its shareholders will be able to enjoy the benefits of both
favorable structures. Following the acquisition, we intend to continue working
closely with our independent lessees, while also building a strong hotel
management organization within the paired operating company."
Pursuant to the acquisition agreement, the shareholders of Cal Jockey and Bay
Meadows will have the option to receive, for each of their paired shares,
either $33.00 in cash or 0.9635 shares of common stock of Patriot American as
reconstituted following the merger. Patriot American's common stock closed
yesterday at $34.25, making the market value of the stock consideration as of
yesterday's close also equal to $33.00 per share. Patriot American, California
Jockey Club and Bay Meadows intend to move forward with the proxy solicitation
process as expeditiously as possible, with the goal of completing the
acquisition in the first quarter of 1997. Following the merger, the
reconstituted Patriot American Hospitality, Inc. will continue to be traded on
the New York Stock Exchange under the symbol, PAH.
Pursuant to the acquisition agreement, Patriot American has advanced $2.9
million to Cal Jockey for payment of the breakup fee due upon termination of
the prior acquisition agreement with Hudson Bay Partners, L.P. Patriot American
will be entitled to receive a $5 million termination fee, and the repayment of
the $2.9 million advance for the Hudson Bay termination fee in the event the
Cal Jockey and Bay Meadows boards of directors receive a higher unsolicited
offer which they accept pursuant to the exercise of their fiduciary
responsibilities and in certain other circumstances.
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The Cal Jockey and Bay Meadows boards of directors each received a fairness
opinion with respect to the transaction from Montgomery Securities, financial
advisor to Cal Jockey and Bay Meadows. PaineWebber Incorporated acted as
financial advisor to Patriot American, and provided a fairness opinion on the
transaction.
"The Boards of Directors of California Jockey Club and Bay Meadows have
determined that the Patriot American transaction represents a very attractive
set of alternatives for our paired shareholders," said Kjell Qvale, chairman of
California Jockey Club. "The acquisition agreement provides our shareholders
with the option to accept either $33.00 in cash for their paired shares or to
invest in Patriot American, one of the most successful REITs in the country,
based upon yesterday's closing price."
Patriot American's performance has resulted in a total return on investment of
approximately 50% to its shareholders in the last 13 months.
In connection with the acquisition, Patriot American will obtain ownership of
all of the assets of California Jockey Club and Bay Meadows. The real estate
assets which Patriot American will acquire consist principally of approximately
175 contiguous acres of land in San Mateo, California, including approximately
97 acres on which the historic Bay Meadows Racecourse is situated. Following
the acquisition, Patriot American intends to continue racing operations at Bay
Meadows Racecourse. In order to continue racing operations, Patriot will
construct new stabling facilities on the main racecourse grounds, which it
expects to finance principally from the cash balances of Cal Jockey and Bay
Meadows.
"We are extremely pleased with this acquisition agreement, which not only
provides superior value for our shareholders, but also helps to insure the
continued operation of Bay Meadows Racecourse," said Jack Liebau, CEO and a
director of Bay Meadows.
Patriot American Hospitality is one of the nation's largest and fastest-growing
hotel REITs. Patriot's portfolio currently consists of 42 hotels with 10,246
rooms, primarily full-service hotels in major U.S. markets. Major hotel brands
in Patriot's portfolio include Crowne Plaza, Doubletree, Embassy Suites, Grand
Heritage, Hilton, Holiday Inn, Hyatt, Marriott, Radisson, Sheraton Four Points,
WestCoast and Wyndham.
For additional information regarding Patriot American free of charge
via fax, dial 1-800-PRO-INFO and use the company's stock symbol "PAH."
