| Merger
Creates World’s Llargest Golf Course Company National
Golf Properties, Inc. ("National Golf") (NYSE:TEE) has announced that
its board of directors has approved a definitive merger agreement with its primary
tenant, American Golf Corporation ("American Golf") and certain of American
Golf's affiliates, including Golf Enterprises, Inc. and European Golf, LLC. National
Golf Properties is the largest publicly traded company in the United States specializing
in the ownership of golf course properties with 131 golf courses geographically
diversified among 22 states. American
Golf is the largest operator of golf facilities in the world. The company (including
its affiliates) employs over 20,000 men and women and operates more than 300 private,
resort and daily fee golf courses and practice centres in the United States, United
Kingdom, Australia and Japan. The
companies today: - Operate
246 properties in the United States, with a strong presence in Southern California
and other highly desirable golf markets including the San Francisco Bay area,
New York City, Atlanta, Hilton Head Island, Chicago and Las VegasOperate
27 properties in the United Kingdom, Japan and Australia
- Own
124 of the above-mentioned propertiesHave over 50,000 members at 78 private country
clubs
- Have nearly
100,000 active paid members of a golf frequency reward program offered at more
than 150 of the new company's public courses
- Have
over 20,000 employees andHave
combined revenues in excess of $700 million
- Upon completion
of the merger, the new company will become the largest owner and operator of golf
courses worldwide.
Under
the terms of the agreement, National Golf and American Golf and its designated
affiliates will become subsidiaries of a newly-formed corporation, incorporated
in Delaware, to be named at a later date. All issued and outstanding shares of
National Golf will be converted tax-free on a one-for-one basis into an equal
number of shares of common stock in the new company. In
addition, all common limited partnership interests in National Golf Operating
Partnership, L.P. (other than those held by affiliates that will be owned by the
new company) will be converted on a one-for-one basis into an equal number of
shares of common stock in the new company. Upon consummation of the merger, National
Golf will no longer be a real estate investment trust. In full, there are currently
20.5 million outstanding National Golf shares and common units that will be converted,
representing a total of 20.5 million votes in the newly combined company. Shareholders
of American Golf and its affiliates will receive total consideration of up to
100,000 shares of Class C preferred stock in the new company, 156,005 shares of
common stock in the new company (which is equivalent to 156,005 common limited
partnership units in National Golf Operating Partnership, L.P. currently held
by entities controlled by David Price that are being contributed to the new company)
and $10,000 cash. Each
of the shares of Class C preferred stock may be converted at any time within seven
years into a number of shares of common stock in the new company equal to 22.8
multiplied by the current market price of the common stock minus $15.00, then
divided by the current market price. This Class C preferred stock carries no dividend,
has no put rights, represents a total of 230,000 votes, has a liquidation preference
of $1 million and may, at the new company's option, be redeemed for $1 million
at any time after the twentieth anniversary of the closing of the transaction. After
the merger is completed, current National Golf shareholders and National Golf
Operating Partnership, L.P. common unit holders together will own 100 percent
of the new company's common shares. The
new company will achieve a $6 million benefit due to the cancellation of net debt
owed to David Price and his related entities. As
of December 31, 2001, American Golf and its related entities had unaffiliated
third-party debt of $126 million. National Golf had unaffiliated third-party debt
of $484 million and cash on hand in the amount of $63 million at year-end 2001.
Upon consummation of the transaction, each company and its related entities would
remain subject to their debt obligations unless such debt obligations are refinanced. The
transaction is subject to approval by National Golf shareholders, lenders to National
Golf and American Golf and common and preferred unit holders of National Golf
Operating Partnership, L.P., as well as customary regulatory approvals and certain
other conditions described in the merger agreement. The companies currently anticipate
that the transaction will close by the end of the third quarter of 2002. In
the event that the transaction is not completed or is materially delayed, there
may be serious adverse consequences on the financial condition and operations
of both National Golf and American Golf. There can be no assurance as to whether
or when these conditions will be satisfied. Charles
S. Paul, chairman of the Independent Committee and interim chief executive officer
of National Golf, stated, "The Independent Committee has evaluated the alternatives
available to us, and we have concluded that a merger with American Golf is in
the best interests of all our stakeholders. This transaction aligns the interests
of shareholders and puts the assets of the combined company under a unified management
structure with common goals and a focused execution strategy. We are working closely
with the lenders of both National Golf and American Golf to extend our near-term
debt maturities. As the next step in this process, we are pursuing new debt and
equity financing." David
G. Price, founder of National Golf and American Golf, stated, "Through today's
transaction, I have invested the Price-related assets of American Golf into National
Golf. This firmly aligns my interests with those of National Golf shareholders,
positioning the combined company for future growth and success. I look forward
to working with the Independent Committee to help ensure a smooth and productive
transition and merger." Upon
the signing of the merger agreement, American Golf and its affiliates became bound
by certain covenants that allow the Independent Committee of National Golf oversight
into the day-to-day operations at American Golf. In addition, the independent
directors will be responsible for the integration of the companies during the
transition period, the negotiation and approval of a new equity investment and
determination of the management of the new company. The
board of directors of the new company will be comprised of the five members who
currently sit on the board of National Golf and will include David Price. The
majority of the board is and will continue to be independent. It is possible that
the board of directors will be modified as part of discussions with new equity
investors. The
Independent Committee's plan undertakes to strengthen the company's balance sheet
while also stabilizing and enhancing the value of the new company's leading property
portfolio through selective investments, the continuation of a strategic acquisition
and divestiture program and the roll-out of new membership products and services.
The Independent Committee believes this transaction would enhance value for shareholders
while further reducing debt. On
March 29, 2002, National Golf entered into an agreement with certain of its lenders
on account of defaults under its $300,000,000 unsecured credit facility, extending
the term of the existing forbearance agreement with these lenders until April
30, 2002 and extending the maturity of the revolver portion of the facility from
March 29, 2002 until April 30, 2002. National
Golf noted that American Golf has paid in full its rent obligations for March
2002 and has paid year-to-date approximately one-half of its rent obligations.
With the approach of the high demand season, the company expects American Golf
to be current with its rent obligations on a monthly basis going forward. Lazard
served as investment banker to the Independent Committee and Wachtell, Lipton,
Rosen & Katz served as legal advisors. | 
