Starwood 2006 Annual Report Download - page 78

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Acquisition”). The purchase price of approximately $252 million was funded from available cash and the return of
the original Le Méridien investment. The Company has accounted for this acquisition under the purchase method in
accordance with SFAS No. 141 and has allocated $114 million of the purchase price to goodwill with the remainder
assigned to the estimated fair value of the assets acquired and liabilities assumed.
Recapitalization of the Joint Venture that Owns the Sheraton Imperial Hotel. In August 2005, the
Company provided a $30 million loan related to the recapitalization of the joint venture that owns the Sheraton
Imperial Hotel in Kuala Lumpur, Malaysia. The Company has a 49% ownership interest in the joint venture.
Acquisition of the Remaining Interest in PT Indo-Pacific Sheraton. In August 2005, the Company
acquired the remaining 55% ownership interest in PT Indo-Pacific Sheraton (“IPS”) for approximately $12 million.
IPS is an Indonesian management company that has the exclusive right to manage all Sheraton hotels in Indonesia.
IPS currently manages ten properties. Prior to August 2005, the Company owned 45% of IPS.
Acquisition of Sheraton Kauai Resort. In March 2004, the Company acquired the 413-room Sheraton Kauai
Resort on Poipu Beach in Kauai, Hawaii. The purchase price for the property was approximately $40 million and
was funded from available cash. Prior to the acquisition, the Company managed the property for the former owner.
Tender Offer to Acquire Partnership Units of Westin Hotels Limited Partnership. In the fourth quarter of
2003, the Company commenced a tender offer to acquire any and all of the outstanding limited partnership units of
Westin Hotels Limited Partnership, the entity that indirectly owned the Westin Michigan Avenue Hotel in Chicago,
Illinois, one of the Company’s managed hotels. The tender offer expired on February 20, 2004 and approximately
34,000 units were tendered to the Company and accepted for payment, representing approximately 25% of the
outstanding units. The purchase price of approximately $26 million was funded from available cash. In January
2005, the Westin Michigan Avenue Hotel was sold and the Company received proceeds of approximately
$27 million.
Acquisition of Bliss World LLC. In January 2004, the Company acquired a 95% interest in Bliss World LLC
which, at the time of the acquisition, operated three stand alone spas (two in New York, New York and one in
London, England) and a beauty products business with distribution through its own internet site and catalogue as
well as through third party retail stores. The aggregate purchase price for the acquired interest was approximately
$25 million and was funded from available cash. The Company recorded approximately $22 million in goodwill
associated with this acquisition. In 2005, the Company acquired the remaining 5% interest for approximately
$1 million.
Note 5. Asset Dispositions and Impairments
During the second quarter of 2006, the Company consummated the Host Transaction whereby subsidiaries of
Host acquired 33 properties and the stock of certain controlled subsidiaries, including Sheraton Holding and the
Trust. The stock and cash transaction was valued at approximately $4.1 billion, including debt assumption (based on
Host’s closing stock price on April 7, 2006 of $20.53). In the first phase of the transaction, 28 hotels and the stock of
certain controlled subsidiaries, including Sheraton Holding and the Trust, were acquired by Host for consideration
valued at $3.54 billion. On May 3, 2006, four additional hotels located in Europe were sold to Host for net proceeds
of approximately $481 million in cash. On June 13, 2006, the final hotel in Venice, Italy was sold to Host for net
proceeds of approximately $74 million in cash. In connection with the first phase of the transaction, Starwood
shareholders received approximately $2.8 billion in the form of Host common stock valued at $2.68 billion and
$119 million in cash for their Class B shares. Based on Host’s closing price on April 7, 2006, this consideration had
a per – Class B share value of $13.07. Starwood directly received approximately $738 million of consideration in
the first phase, including $600 million in cash, $77 million in debt assumption and $61 million in Host common
stock. In addition, the Corporation assumed from its subsidiary, Sheraton Holding, debentures with a principal
balance of $600 million. As the sale of the Class B shares involved a transaction with Starwood’s shareholders, the
book value of the Trust associated with this sale was treated as a non-reciprocal transaction with owners and was
F-17
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS — (Continued)