La Quinta — Merger or Acquisition (July 2004)
26 slides from La Quinta's merger presentation, Jul 15, 2004
Slide 1: Acquisition of The Marcus Corporation's Limited Service Lodging Division
La Quinta Corporation Acquisition of The Marcus Corporation’s Limited Service Lodging Di BAYMONT INNS & SUITES
Slide 2: Safe Harbor Statement
Safe Harbor Statement Certain metters discussed in this precentstion may constitute “forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Secusties Litigetion Reform Act 0f 1995, Words such as
Slide 3: Table of Contents
Table of Contents 25 R96 Overview of Transaction Creating Shareholder Value Finaneing Considerations Valuation/Retum Analyses ~— BAYMONT.
Slide 4: Overview of Transaction
Overview of Transaction I
Slide 5: Transaction Summary
Transaction Summary Acquisition of limited service brands and real estate fits both strategic objectives. Acquire 170 Baymont Inns & Suites 84 owned Baymont hotels 24 franchised Baymont hotels 1 joint venture Baymont hotel subject to partner’ s right of first refusal or consent 1 managed Baymont hot
Slide 6: Transaction Summary (continued)
Transaction Summary (continued) Acquisition is expected to be accretive and create shareholder value. ‘@ Excellent strategic/operational fit ~ Integrate a compamble typeof zee anda business that runs similarly to La Quinta ~ Dives realestate concentration Ada to network vale ‘@ Expected to increase
Slide 7: Creating Shareholder Value
Creating Shareholder Value I
Slide 8: Creating Shareholder Value
Creating Shareholder Value Gain Well Maintained Asset Base Obtain Strong Brand ‘@ Expand Geographie Distribution ¢ Provide Geographic Diversification Enhance Revenue Performance @ Improve Cost Structure Accelerate Franchising Benefit From Strong Lodging Environment ~—
Slide 9: Gain Well Maintained Asset Base
Gain Well Maintained Asset Base Approximately $75 million invested in assets over the last five years. Estimated replacement cost of approximately $560 million Properties have been maintained on a programmed capex cycle ~— 9 BAYMONT.
Slide 10: Obtain Strong Brand
Obtain Strong Brand Amenities include complimentary breakfast, in-room coffee maker, hairdryer and iron and ironing board. Properties feature Ovations rooms, featuring upgraded bedding, large work areas and complimentary welcome gift. Many properties also feature high- speed Internet acc ~— 10 BAYMO
Slide 11: Expand Geographic Distribution
Expand Geographic Distribution Expands La Quinta’s geographic footprint and provides a strong new presence in the Midwest. ~— & Fons) u BAYMONT.
Slide 12: Provide Geographic Diversification
Provide Geographic Diversification Enhances La Quinta’s geographic diversity, reducing concentration in Texas while adding distribution in Wisconsin, Michigan and Illinois.
Slide 13: Enhance Revenue Performance
Enhance Revenue Performance La Quinta operates at an 18% RevPAR premium to Baymont. Taunt 3 3 3 in grees ~— Cha B BAYMONT.
Slide 14: Enhance Revenue Performance (continued)
Enhance Revenue Performance (continued) 1 Implementing La Quinta’s systems and programs can lead to stronger Baymont revenue performance. Improve Intemet Productivity ( ofRevenue) 13% % Leverage Loyalty Programs (%ofRevenue) 0% 29% Inprove Call Center Production (ofRevenue) 16% % Leverage La Quinta
Slide 15: Enhance Revenue Performance (continued)
Enhance Revenue Performance (continued) 1 Additional opportunities exist at both Baymont and La Quinta branded hotels to enhance revenue performance. @ Re-brand selected Baymonts and La Quintas — Improve network value of both brands ~ ROI driven decision to convert @ Bring greater resources to Baymo
Slide 16: Improve Cost Structure
Improve Cost Structure Baymont operates with an overhead and property level cost structure higher than La Quinta, Leverage existing La Quinta corporate overhead ~ Reduce Baymont overhead by $4 million @ Reduce Baymont’s operating costs — Utilize La Quinta’s proven labor management skills — Implement
Slide 17: Accelerate Franchising
Accelerate Franchising La Quinta has a strong track record of enhancing franchisee’s operating performance and growing a successful franchise program. @ Grow Baymont by at least 25 franchise hotels per year Grow La Quinta by at least 50 franchise hotels per year d Hotel 100 a ~— BAYMONT.
Slide 18: Benefit From Strong Lodging Environment
Benefit From Strong Lodging Environment Lodging industry fundamentals are strong. Supply growth at 10-year historic low @ RevPAR growth a result of occupancy gains and average rate growth ss = er a os ie : 2% 5 RevPAR 6% 8% 8% PD HP PSP oP DAP PI IO HS ~— Cha 18 BAYMONT.
Slide 19: Financing Considerations
Financing Considerations I
Slide 20: Sources & Uses
Sources & Uses Cash at 931/03 $ Bt Purchase Price Debt 150 Transaction & Financing Costs Working Capital Total $4 Total ~— Cha 20 BAYMONT.
Slide 21: Financing Strategy
Financing Strategy @ Have obtained committed finaneing of $150 million — Could be term bank loan or fixed/floating rate senior notes — Can be upsized to $200 million ‘ Maintain strong balance sheet — Preserve $150 million unfunded revolver ~ Net Debt/Adjusted EBITDA increases to approximately 4 5x (
Slide 22: Valuation / Return Analyses
Valuation / Return Analyses I
Slide 23: Creating Shareholder Value
Creating Shareholder Value Acquisition is expected to be accretive and create shareholder value. ‘@ Excellent strategic/operational fit ~ Integrate a compamble typeof zee anda business that runs similarly to La Quinta ~ Dives realestate concentration Ada to network vale ‘@ Expected to increase Marcu
Slide 24: EBITDA Valuation
EBITDA Valuation Purchased business at attractive multiple below La Quinta’s multiple. LIM2/04 mn miltons Operating income (as reported by Marcus) $2 Deprecietion & amortization (as reported by Marcus) 13 ————_ includes Marcus Corporation's Limited service lodging segment EBITDA $3 ‘aiscansd votpolu
Slide 25: Per Key Real Estate Valuation
Per Key Real Estate Valuation Purchase real estate below replacement costs and private market sales. Purchasing Baymont real estate at average of $36,000 per key — Below Baymont replacement cost of $55,000 per key ~ Below other Baymont private market sales of $40,000 per key ~ Below recent limited s
Slide 26: Searchable text section of graphics
Searchable text section of graphics shown above [ LOG O] La Quinta Corporation Acquisition of The Marcus Corporation’s Limited Service Lodging Division [LOGO] Saf e Harbor Statement Certain matters discussed in this presentation may constitute “forward-looking statements” within the meaning of Secti