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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
PATRIOT AMERICAN HOSPITALITY, INC.
(Exact name of Registrant as specified in its Charter)
VIRGINIA 0-26528 75-2599709
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
3030 LBJ FREEWAY, SUITE 1500 75234
DALLAS, TEXAS (Zip Code)
(Address of Principal Executive Offices)
(972) 888-8000
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if change since last report)
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 stock.
The Agreement, which is subject to Cal Jockey, Bay Meadows, and Patriot
stockholder approval, provides for a 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 affiliated entities); (3) immediately following
the consummation of the tender offer, Patriot will merge with and into Cal
Jockey, with Cal Jockey being the surviving corporation. In connection with the
Merger, Patriot stockholders will receive Cal Jockey stock that will be
distributed and paired with the Bay Meadows Subscribed Shares at the ratio of
1.0379 paired shares for each share of Patriot stock held at the effective time
of the Merger (this exchange ratio will result in each paired share of Cal
Jockey and Bay Meadows stock that is retained by the Cal Jockey and Bay Meadows
stockholders and not tendered for cash representing effectively the equivalent
of 0.9635 shares of Patriot stock at the effective time of the Merger.) The
members of 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 to each Board of nominees selected by Patriot.
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 Boards 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 loan shall
be payable 180 days after the date of the Agreement 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) the 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; provided that such
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amount shall be immediately repaid by Cal Jockey to Patriot if during the
twelve month period 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
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Patriot's Board of Directors withdraws or modifies its approval or
recommendation of the Transactions, or Patriot's stockholders fail to approve
the Transactions, 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 the failure to
obtain Cal Jockey or Bay Meadows stockholder approval and during the twelve
month period 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
addition, 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
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herein by reference.
ITEM 7. FINANCIAL STATEMENTS 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 .
2
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Form 8-K to be signed on its behalf by the
undersigned hereunto duly authorized.
PATRIOT AMERICAN HOSPITALITY, INC.
/s/ Paul A. Nussbaum
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Paul A. Nussbaum,
Chairman and Chief Executive Officer
Date: November 6, 1996
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EXHIBIT INDEX
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Exhibit Page
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99.1 Joint Press Release of California Jockey Club, 5
Bay Meadows Operating Company and Patriot
American Hospitality, Inc. dated October 31, 1996.
4
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EXHIBIT 99.1
PRESS RELEASE
Thursday October 31, 1996
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
October 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 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."
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"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 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.
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
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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.
