Filed by Host Marriott Corporation pursuant to Rule 425
under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
under the Securities Exchange Act of 1934
Subject Company: Starwood Hotels & Resorts
Commission File No.: 001-6828
Information about the Proposed Transaction and Where to Find It
In connection with the proposed transaction, Host Marriott Corporation will file a proxy statement/prospectus as part of a registration statement on Form S-4 and other documents regarding the proposed transaction with the Securities and Exchange Commission (“SEC”). Investors and security holders are urged to read the proxy statement/prospectus when it becomes available because it will contain important information about Host Marriott Corporation, Starwood Hotels & Resorts and the proposed acquisition. A definitive proxy statement/prospectus will be sent to stockholders of Host Marriott Corporation seeking their approval of the issuance of Host Marriott Corporation common stock in the transactions contemplated by the master agreement. Investors and security holders may obtain a free copy of the definitive proxy statement/prospectus (when available) and other documents filed by Host Marriott Corporation with the SEC at the SEC’s web site at www.sec.gov. The definitive proxy statement/prospectus and other relevant documents may also be obtained, when available, free of cost by directing a request to Host Marriott Corporation, 6903 Rockledge Drive, Suite 1500, Bethesda, MD 20817, Attention Investor Relations, (telephone 240-744-1000). Investors and security holders are urged to read the proxy statement/prospectus and other relevant material when they become available before making any voting or investment decisions with respect to the proposed transaction.
Host Marriott Corporation and its directors and executive officers may be deemed, under SEC rules, to be participants in the solicitation of proxies from the stockholders of Host Marriott Corporation in respect of the proposed transaction. Information about Host Marriott Corporation and its directors and executive officers, and their ownership of securities in Host Marriott Corporation, is set forth in the proxy statement for Host Marriott Corporation’s 2005 Annual Meeting of Stockholders, which was filed with the SEC on April 11, 2005. Additional information regarding the direct and indirect interests of those persons may be obtained by reading the proxy statement/prospectus regarding the proposed transaction when it becomes available.
This communication shall not constitute an offer to sell or the solicitation of an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.
Cautionary Language Concerning Forward-Looking Statements
This filing contains forward-looking statements within the meaning of federal securities regulations. These forward-looking statements are identified by their use of terms and phrases such as “anticipate,” “believe,” “could,” estimate,” “expect,” “intend,” “may,” “plan,” predict,” “project,” “will,” “continue” and other similar terms and phrases, including references to assumptions and forecasts of future results, statements about the expected scope and timing of the acquisition, expected financial results and credit effects of the acquisition, consequences of management efforts, opportunities for growth and expectations as to timing, nature and terms of financing and other sources of funds. Forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors which may cause the actual results to differ materially from those anticipated at the time the forward-looking statements are made. These risks include, but are not limited to: national and local
economic and business conditions, including the potential for terrorist attacks, that will affect occupancy rates at our hotels and the demand for hotel products and services; operating risks associated with the hotel business; risks associated with the level of our indebtedness and our ability to meet covenants in our debt agreements; relationships with property managers; our ability to maintain our properties in a first-class manner, including meeting capital expenditure requirements; our ability to compete effectively in areas such as access, location, quality of accommodations and room rate structures; changes in travel patterns, taxes and government regulations which influence or determine wages, prices, construction procedures and costs; our ability to complete pending acquisitions and dispositions; and our ability to continue to satisfy complex rules in order for us to qualify as a real estate investment trust for federal income tax purposes and other risks and uncertainties associated with our business described in Host Marriott Corporation’s filings with the SEC. The completion of the transaction with Starwood (either in whole or in part relating to the acquisition of certain hotels) is subject to numerous closing conditions and there can be no assurances that the transactions as a whole, or portions of these transactions, will be completed. These closing conditions include, but are not limited to: Host Marriott Corporation receiving approval from its stockholders to issue shares to Starwood’s Class B holders, obtaining various lender consents and regulatory approvals, the accuracy of representations and warranties and compliance with covenants, the absence of material events or conditions, and other customary closing conditions. Our expectations as to the financial consequences of the acquisition may be affected by the risks noted above and factors unique to acquisitions, including the timing and successful integration of these hotels into our portfolio and the number and location of the hotels we ultimately acquire with the acquisition. Although Host Marriott Corporation believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that the expectations will be attained or that any deviation will not be material. All information is as of the date of this filing and Host Marriott Corporation undertakes no obligation to update any forward-looking statement to conform the statement to actual results or changes in expectations.
Non-GAAP Financial Measures
This filing contains non-GAAP financial measures within the meaning of the rules of the SEC. Information about these measures and reconciliations between the non-GAAP financial measures and the GAAP financial measures are included in Host Marriott Corporation’s press release announcing the transaction, dated November 14, 2005, and third quarter 2005 earnings press release, dated October 12, 2005, both of which are available on Host Marriott Corporation’s web site at www.hostmarriott.com.
 1 1 |
 2 Transaction Overview Portfolio of 38 upper upscale and luxury full-service hotels (18,964 rooms), including 25 domestic and 13 international assets Purchase Price: $4.0 billion ($213,000/key) 2006 Full-year EBITDA: $355 million to $365 million 2006 EBITDA Multiple: 11.1x to 11.4x Transaction expected to close at the end of 1Q06 and is subject to a Host Marriott stockholder vote and other closing conditions. 2 Luxury / St. Regis 1 Unbranded 20 Sheratons 13 Westins 2 Ws |
 3 Strong Portfolio High quality portfolio that matches up well with our portfolio in terms of asset quality and positioning; average hotel contains approximately 500 rooms and generates RevPAR of $117, both comparable to our current portfolio Portfolio made up entirely of luxury and upscale hotels, including six city center hotels with over 750 rooms 80% of the hotels* are in urban, convention or resort locations, providing additional concentration in our desired segments * Based on revenues. |
 4 Strong Portfolio (cont.) The top 16 hotels in the portfolio contribute 75% of the portfolio’s cash flow The portfolio includes key assets such as: Westin Palace Madrid Sheraton Centre Toronto W Seattle Westin Grand Washington, DC Westin Europa & Regina (Venice) Westin Palace Milan Sheraton New York Sheraton San Diego Sheraton Boston Westin Seattle W New York |
 5 Strong Portfolio (cont.) Excellent geographic distribution; most markets have strong growth prospects and limited near-term supply; adds presence in key domestic markets such as Seattle, New York, Boston and San Diego 29% of the portfolio* is situated outside the United States, with 15% in Europe, providing additional geographic distribution Unique opportunity to acquire high-quality international assets at attractive pricing * Based on revenues. |
 6 Profile of Hotel Portfolio By Type (Based on Revenue) Host Marriott Stand-alone 9% 19% 52% 20% Starwood Portfolio 10% 10% 71% 9% Combined 9% 57% 17% 17% Downtown Resort Airport Suburban |
 7 Profile of Hotel Portfolio Geographic Scope (Based on Revenue) Host Marriott Stand-alone 3% 97% Starwood Portfolio 71% 29% Combined 9% 91% International Domestic |
 8 Profile of Hotel Portfolio Brand Mix (Based on Revenue) Host Marriott Stand-alone 12% 6% 9% 1% 70% 2% Starwood Portfolio 3% 9% 55% 33% Combined 4% 2% 2% 7% 9% 53% 14% 9% Marriott Sheraton Westin Ritz-Carlton Hyatt Fairmont W Other |
 9 Profile of Hotel Portfolio Regional Scope (Based on Revenue) Horizon Sun Combined Percentage Region % % % Change Atlanta 8% 0% 6% (2%) DC Metro 11% 2% 9% (2%) Florida 15% 1% 12% (3%) Hawaii 5% 0% 4% (1%) International 3% 29% 9% 6% Middle Atlantic 16% 21% 17% 1% Mountain 3% 2% 2% (1%) New England 5% 12% 7% 2% North Central 7% 7% 7% 0% Pacific 20% 24% 21% 1% South Central 7% 2% 6% (1%) |
 10 Profile of Hotel Portfolio Geographic Coverage – Host Marriott Portfolio Host Marriott Portfolio |
 11 Profile of Hotel Portfolio Geographic Coverage – Combined Portfolio Starwood Portfolio Host Marriott Portfolio |
 12 Enhanced Growth Potential & Brand Diversification Transaction creates significant relationship with another major hotel operating/brand company and furthers our brand diversification strategy Opportunity to benefit from expected improvement in market share among Starwood’s brands Opportunity to improve growth through aggressive asset management and value enhancement initiatives Partnership with Starwood will enhance future growth opportunities |
 13 Enhanced Growth Potential & Brand Diversification (cont.) |
 14 Financial Considerations $2.3 billion (approximately 133.5 million shares @ $17.00/share) 100% will be distributed directly to Starwood shareholders Equity $2.3 billion of equity issued to Starwood shareholders $700 million of assumed debt $1.0 billion of cash Consideration $4.0 billion ($213,000/key) Purchase Price |
 15 Financial Considerations (cont.) Bridge loan in place to fund entire cash portion of the transaction if necessary Expect to fund cash portion of purchase price through a combination of debt, asset sales and proceeds raised through a joint venture related to the acquired European assets Cash $704 million* at a weighted average interest rate of 7.5% and an average maturity of 12 years Assumed Debt * Contingent on completing a consent solicitation. |
 16 Earnings Impact $1.45 $1.35 $1.64 $1.56 FFO/ diluted share (2) $1,045 $1,005 $365 $355 Adjusted EBITDA (2) ($mm) High Low High Low Host Marriott, L.P. Purchase Portfolio (1) FY 2006 (1) Forecast reflects full year results for 2006; however, the transaction is not
expected to close until the end of 1Q06 and may close in stages.
(2) Reconciliations of non-GAAP measures to the most- directly comparable GAAP
measures are available on our website and in our filings with the
SEC. |
 17 Financial Considerations (cont.) EBITDA multiple for overall transaction is 11.1x to 11.4x, which is 40 to 70 basis points below our current trading multiple Purchase price of approximately $213,000 per key represents a 25-30% discount to replacement cost Unleveraged 10-year internal rate of return exceeds our current Weighted Average Cost of Capital by roughly 200 basis points The transaction will be accretive to our credit under all of our financing scenarios, and meaningfully accretive under our anticipated structure of asset sales and a European joint venture |
 18 Overview 9 3 Countries Over 50 Over 35 Markets 18 14 Brands $9 billion $6 billion Equity Market Cap. 6 th -Largest REIT 9 th -Largest REIT Largest Lodging REIT Largest Lodging REIT Largest Public Lodging Co. 3 rd -Largest Pub. Lodging Co. Scale $16 billion $12 billion TEV 74,185 55,221 No. of Rooms 145 107 No. of Hotels HOST hotels & resorts |
 19 Portfolio Overview 2 Luxury / St. Regis 1 Unbranded 20 Sheratons 13 Westins 2 Ws |
 20 Portfolio Overview Assets Ranked by Size No. Asset City State Country Rooms 1 Sheraton New York Hotel New York NY USA 1,746 2 Sheraton Centre Toronto Hotel Toronto Canada 1,377 3 Sheraton Boston Hotel Boston MA USA 1,216 4 Sheraton San Diego Hotel & Marina San Diego CA USA 1,044 5 The Westin Seattle Seattle WA USA 891 6 Le Centre Sheraton Montreal Hotel Montreal Canada 825 7 The Westin Los Angeles Airport Los Angeles CA USA 740 8 W New York New York NY USA 688 9 Sheraton Roma Hotel & Conference Center Rome Italy 634 10 The Westin Indianapolis Indianapolis IN USA 573 11 Sheraton Indianapolis Hotel & Suites Indianapolis IN USA 560 12 The Westin Mission Hills Resort & Spa Rancho Mirage CA USA 512 13 The Westin Palace, Madrid, a Luxury Collection Hotel Madrid Spain 468 14 The Westin Cincinnati Cincinnati OH USA 456 15 Sheraton Stamford Hotel Stamford CT USA 448 16 The Westin Tabor Center Denver CO USA 430 17 W Seattle Seattle WA USA 426 18 The Westin South Coast Plaza Costa Mesa CA USA 390 19 Sheraton Milwaukee Brookfield Hotel Brookfield WI USA 389 |
 21 Portfolio Overview (cont.) Assets Ranked by Size No. Asset City State Country Rooms 20 Sheraton Santiago Hotel & Convention Center Santiago Chile 379 21 Sheraton Braintree Hotel Braintree MA USA 374 22 Sheraton Parsippany Hotel Parsippany NJ USA 370 23 Sheraton Skyline Hotel & Conference Centre Hayes United Kingdom 350 24 Sheraton Warsaw Hotel & Towers Warsaw Poland 350 25 The Westin Waltham-Boston Waltham MA USA 346 26 Sheraton Hamilton Hotel Hamilton Canada 301 27 Sheraton Fiji Resort Nadi Fiji 281 28 The Westin Royal Denarau Resort Nadi Fiji 273 29 The Westin Grand, Washington, D.C. Washington D.C. USA 263 30 Sheraton Suites Tampa Airport Tampa FL USA 259 31 Sheraton Needham Hotel Needham MA USA 247 33 St. Regis Hotel, Houston Houston TX USA 232 32 Westin Palace, Milan, a Luxury Collection Hotel Milan Italy 228 34 Sheraton Tucson Hotel & Suites Tucson AZ USA 216 35 Sheraton Providence Airport Hotel Warwick RI USA 206 36 The Westin Europa & Regina, Venice, a Luxury Collection Hotel Venice Italy 185 37 Capitol Hill Suites Washington D.C. USA 152 38 San Cristobal Tower, a Luxury Collection Hotel Santiago Chile 139 Total Portfolio 18,964 |
 Sheraton New York Hotel New York, NY Number of Rooms: 1,746 Total Function Space: 55,000 sf F&B Outlets: 4 Other: • 4 Retail Outlets (1,600 sf) • 6,800 sf Fitness Ctr |
 Sheraton San Diego Hotel & Marina San Diego, CA Number of Rooms: 1,044 Total Function Space: 80,000 sf F&B Outlets: 7 Other: • 300 slip Marina • 3,500 sf Spa |
 Sheraton Boston Hotel Boston, MA Number of Rooms: 1,216 Total Function Space: 69,275 sf F&B Outlets: 2 Other: • 10,200 sf Fitness Ctr |
 Westin
Seattle Seattle, WA Number of Rooms: 891 Total Function Space: 54,375 sf F&B Outlets: 3 Other: • 2,756 sf Pool & Spa |
 W
Seattle Seattle, WA Number of Rooms: 426 Total Function Space: 10,000 sf F&B Outlets: 2 Other: • 650 sf Fitness Center |
 W New
York New York, NY Number of Rooms: 688 Total Function Space: 3,248 sf F&B Outlets: 2 Other: • 3 Retail Outlets (3,800 sf) • 20,000 sf Bliss Spa |
 Westin
Palace Madrid Madrid, Spain Number of Rooms: 468 Total Function Space: 24,645 sf F&B Outlets: 2 Other: • 1,800 sf Fitness Ctr |
 Sheraton Centre Toronto Hotel Toronto, Canada Number of Rooms: 1,377 Total Function Space: 84,000 sf F&B Outlets: 2 Other: • 2,000 sf Fitness Ctr • Significant Retail Space at Toronto Underground Level |
 Westin
Mission Hills Resort & Spa Rancho Mirage, CA Number of Rooms: 512 Total Function Space: 94,009 sf F&B Outlets: 8 Other: • Two 18-hole golf courses (Pete Dye & Gary Player) • 13,000 sf spa |
 Westin
Grand Washington D.C. Washington, D.C. Number of Rooms: 263 Total Function Space: 11,667 sf F&B Outlets: 3 |
 Westin
Palace Milan Milan, Italy Number of Rooms: 228 Total Function Space: 10,000 sf F&B Outlets: 3 625 sf Fitness Ctr |
 Westin
Europa & Regina Venice, Italy Number of Rooms: 185 Total Function Space: 63,886 sf F&B Outlets: 2 |
 HOST hotels & resorts |