Changes to the merger agreement in the amendment include, but are not limited to, the following:
• The three hotels located in Canada will not be included in the transaction because Starwood was unable to obtain a necessary tax ruling. As a result of the exclusion of the Canadian hotels, the overall purchase price for the transaction has been reduced by approximately $276 million to approximately $3.76 billion. The adjustment will be made to the cash portion of the transaction consideration.
• $600 million of senior notes issued by Sheraton Holding Corporation will not be assumed as part of the transaction (including $150 million of senior notes previously excluded from the transaction), which reduces the amount of debt the Company will be assuming in accordance with the transaction to approximately $104 million.
• The closing of five of the hotels included in the transaction located in Europe will be deferred as a result of certain notice requirements and will not be included in the initial closing of the transaction. The acquisition of four of the hotels is expected to occur by May 3, 2006 and the acquisition of the fifth hotel, The Westin Europa & Regina in Venice, Italy, is expected to occur no later than June 15, 2006.
On March 24, 2006, the Company entered into a joint venture in the Netherlands with Stichting Pensioenfonds ABP, the Dutch pension fund ("ABP") and Jasmine Hotels Pte Ltd, a subsidiary of GIC Real Estate Pte Ltd ("GIC RE"), the real estate investment company of the Government of Singapore Investment Corporation Pte Ltd. The joint venture will acquire the five deferred-closing hotels directly from Starwood, and the Sheraton Warsaw Hotel & Towers will be contributed to the joint venture by the Company as a substantial portion of its equity investment in the joint venture. The total consideration for the six hotels will be approximately $621 million. The Company will be a limited partner in the joint venture and also will serve as the general partner of the venture, and potentially will earn a promote based on achieving certain return thresholds for the limited partners. An affiliate of the Company will serve as the asset manager of the joint venture's hotels and will earn fees for its services. The percentage interests of the parties in the joint venture will be 19.9% for ABP, 48% for GIC RE and 32.1% for the Company, including both its general and limited partner interests.
For a more detailed description of the changes to the planned Starwood acquisition and the joint venture, please refer to the supplement to proxy statement/prospectus dated March 2, 2006 filed by the Company with the Securities and Exchange Commission on March 27, 2006. The proxy statement/prospectus will be mailed to shareholders on or about March 27, 2006. The special meeting of the Company's stockholders still will take place on April 5, 2006, and the initial closing of the transaction is scheduled to occur on April 10, 2006.
As a result of the exclusion of the three Canadian hotels from the transaction, the Company's estimated full year 2006 Adjusted Earnings before Interest Expense, Taxes, Depreciation and Amortization (Adjusted EBITDA) will be reduced by approximately $20 million (the EBITDA reduction equals a GAAP net income reduction of approximately $11 million plus depreciation expense of approximately $9 million). Additionally, the Company's first quarter 2006 net income guidance assumed the sale of the Swissotel The Drake, New York would close near the end of the first quarter. The Company now expects the sale, which will result in a gain of approximately $235 million, to occur early in the second quarter. The Company does not believe there will be any other changes to the Company's previously-released earnings guidance.
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