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Allegis Corp., moving closer to completion of its restructuring, said it agreed to sell its Westin Hotels & Resorts unit to the Robert M. Bass Group and Japan-based Aoki Corp. for $1.35 billion.
The definitive agreement, which also calls for the assumption of $180 million in Westin debt, helped reassure investors that the stock market tumble wouldn't significantly disrupt the travel company's restructuring.
The Bass Group is a Fort Worth, Texas, investment firm run by billionaire investor Robert M. Bass. Aoki is a Tokyo-based construction company that also operates six hotels around the world and has two more under construction.
CHICAGO -- Allegis Corp., moving closer to completion of its restructuring, said it agreed to sell its Westin Hotels & Resorts unit to the Robert M. Bass Group and Japan-based Aoki Corp. for $1.35 billion.
The definitive agreement, which also calls for the assumption of $180 million in Westin debt, helped reassure investors that the stock market tumble wouldn't significantly disrupt the travel company's restructuring.
In New York Stock Exchange composite trading, Allegis stock surged $9.50 to $71, recouping Monday's loss of $9.25.
While the sale price was less than some analysts had estimated, others said it was a good deal for Allegis considering the uncertainties in the financial markets.
"They are real quality buyers who won't have trouble with financing," said Jeffrey R. Perry, an analyst at Cyrus J. Lawrence Inc., New York.
The Bass Group is a Fort Worth, Texas, investment firm run by billionaire investor Robert M. Bass. Aoki is a Tokyo-based construction company that also operates six hotels around the world and has two more under construction.
For Aoki, the move is in keeping with a trend to diversify among Japanese construction firms. In addition, the transaction follows a broader trend of Japanese firms buying properties in the U.S.
A source familiar with the transaction said both the Bass Group and Aoki are putting up a substantial amount of cash in the complex deal, but that Industrial Bank of Japan was also providing financing.
A U.S.-based spokesman for Aoki said the firm would be the majority owner, but he wouldn't comment further on the financing. In Fort Worth, a secretary for Mr. Bass said he wouldn't comment either.
An Allegis spokesman said the sale, subject to regulatory review in both the U.S. and Canada -- where some Westin hotels are also located -- is expected to be completed by the end of the year.
Allegis has already completed the sale of its Hilton International hotel chain for $1.07 billion, and the spokesman said the sale of Hertz to a group backed by Ford Motor Co. for $1.3 billion is expected to be completed in November. The company also is looking for a partner to buy as much as a 49% interest in its Covia/Apollo reservations unit, which some analysts say could bring in an additional $350 million to $400 million.
Allegis reiterated yesterday it plans to distribute the net proceeds to shareholders, after subtracting taxes and other fees associated with the sales. It did not disclose the amount or date of that special dividend; analysts say it could total $60 to $65 a share, and that a decision on its timing could be made at the company's board meeting Thursday.
Another likely agenda item is an update -- or decision -- on a new leader for the United Airlines unit. Allegis Chairman Frank Olson currently serves as United's chief executive officer, but he plans to return to his former employer, Hertz.
For some longtime Allegis and United employees, the sale of Westin is the most painful part of the plan to return to the company's airline roots. Acquired in 1970, Seattle-based Westin has extensive marketing tie-ins with the carrier, and some of its executives have gone on to top posts at the parent company.
But Westin has shown unspectacular, albeit steady earnings in recent years as competition has heated up in the luxury hotel market. In 1986, it had operating earnings of $55 million -- about $4 million less than it earned in 1982. Revenue in 1986 was $491.6 million.
To some, Westin is prized more for its valuable real estate, an area in which the Bass family has wide experience. Westin owns or partially owns 28 of the hotels in the chain, including the Westin Plaza Hotel in New York.
The Aoki spokesman said the company has already been contacted by others interested in various properties, but he said "there are no specific plans" to sell of any of them.
The spokesman said the Westin chain will continue to be operated by current Westin management, including chairman and chief executive officer, Harry Mullikin.
Mr. Mullikin, who led another group trying to buy the chain, confirmed that he would stay with Westin. "Obviously, we would have preferred it if our group had been successful, but we are not disappointed in who was" successful, he said.
Aoki acquired the famed Algonquin Hotel in New York last spring; the spokesman said it also has a one-third interest in the Beverly Wilshire Hotel in Beverly Hills, Calif.
Aoki earned $24.3 million on sales of $1.6 billion for the fiscal year ended March 31.
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| Allegis: Selling the Non-Airline Assets |
| UNIT STATUS |
| Hilton International Sale to Ladbroke Group PLC for |
| $1.07 billion announced Sept. 4 |
| and closed Oct. 14. |
| Hertz Corp. Definitive agreement signed Oct. 3 |
| to sell to group backed by Ford |
| Motor Co. for $1.3 billion. |
| Expected to close by year-end, |
| pending regulatory approval. |
| Westin Hotels & Definitive agreement announced |
| Resorts yesterday to sell to Robert M. Bass |
| Group and Aoki Corp. of Japan for |
| a total of $1.53 billion. Subject |
| to regulatory approvals and waiting |
| periods. |
| Covia/Apollo Negotiations continue on joint |
| venture in which partner could buy |
| as much as 49% of the reservations |
| unit. |
Credit: Staff Reporter of The Wall Street Journal
Copyright Dow Jones & Company Inc Oct 28, 1987