The summer of consolidation continues. In yet another deal that advances the "bigger-is-better" notion, Spokane, Wash.-based Red Lion Hotels Corporation has entered into a definitive agreement to acquire the global brands and brand operations of Vantage Hospitality Group, based in Coral Springs, Fla., for $23 million in cash and 690,000 shares of the company’s common stock.
Speaking to HOTEL MANAGEMENT, Mount said RLHC had been working with Vantage on the acquisition for a little under a year, choosing to take their time with the process in the interest of pragmatism.
“We really feel Vantage extends our reach not only as an organization, but it also gives us a solid foothold in the economy segment,” Mount said. “It’s a company that, culturally, has set itself apart from its competitors and will give us a distinct advantage.”
Additional aggregate compensation of up to $7 million in cash and an additional 690,000 shares may be earned contingent upon the achievement of certain performance metrics at the first and second anniversaries of the transaction. The additional consideration includes a $1-million minimum cash payment on the first and second anniversaries. RLHC expects the transaction to be earnings accretive in the 12 months immediately following the closing. The transaction is subject to customary closing conditions and expected to close in the fourth quarter of 2016.
In a release, Greg Mount, president and CEO of RLHC, said the company's acquisition of Vantage will add roughly 1,000 hotel franchises, membership and licensing agreements to RLHC's portfolio. In addition, Vantage's current leadership, located in Coral Springs, will become the new central hub for RLHC's select-service brand operations.
“We are excited to become part of the RLHC family of brands,” said Roger Bloss, founder, president and CEO of Vantage. “Joining RLHC’s platform will provide our members with additional resources to grow their businesses and our guests with a broad array of brands to enjoy. Vantage’s COO, Bernie Moyle, and I are proud that we will be contributing to RLHC’s strategic growth plan and are excited about leading the select-service brands initiative. RLHC and the Vantage team are a winning combination.”
Vantage's brands include America’s Best Inns and Suites; Country Hearth Inns; Jameson Inns; Signature Inn; and 3 Palms Hotels & Resorts. The assets include, but are not limited to the membership, franchise and license agreements, equipment and machinery, customer lists, trademarks and trade names, records, supplies and accounts receivable of the business.
Mount told HOTEL MANAGEMENT that RLHC's current plan is to shift its GuestHouse and Settle Inn brands to the Vantage side of operations, while RLHC takes over operation of the midscale Lexington and Jameson Inn brands. Further, Bloss would be placed in charge of franchise development and distribution for the entire group.
"It will be a complete integration of Vantage into RLHC," Mount said. "The process will allow us to concentrate and innovate in all three segments, but we're not going to make too many changes to the Vantage brand."
Currently, Mount said RLHC is consumed with folding Vantage into the company's operations. Overall, he said RLHC and Vantage operators should not expect to see any major changes until early 2017 when both companies are settled under one umbrella. "In short, it's a segment plan for economy," Mount said. "It's similar to what we did with GuestHouse and Settle Inn years ago; we think they will be stronger together. We had good representation in the U.S., and now we have great representation here and abroad in Canada and Asia. Once we have the strategy right and our branding people feel we have the correct positioning, in early 2017 we will push the brands from there."
Here is a summary of strategic benefits:
- Grows RLHC’s franchised hotel network to over 1,100 with 73,200 rooms from 113 hotels and 14,200 rooms
- Transforms RLHC into a national brand with meaningful scale
- Adds considerable management talent in the select service segment
- Maximizes brand expansion with modest capital investment
- Augments brand offerings for prospective franchisees
- Accretive to RLHC’s earnings and cash flow
- Total consideration for the transaction is structured to align the interests of the Vantage team and RLHC’s shareholders