Choice Hotels International to Separate Franchise & Real Estate Companies

SILVER SPRING, Md. April 29 / Choice Hotels International, Inc. CHH announced today a plan to divide, through a pro rata spin-off to shareholders, its present operations into two separate companies. Choice's franchising operations, consisting of Clarion, Quality, Comfort, Sleep, Rodeway, Econo Lodge and MainStay brands will be distributed to Choice's shareholders and will take the name Choice Hotels International, Inc. The real estate company will include Choice's owned and managed hotel properties.

The spin-off will involve a special dividend to shareholders who will own an interest in each of the two companies. The transaction is conditioned upon, among other things: approval of the special dividend by Choice's board of directors (when details of the dividend will be announced); ratification by the Choice shareholders; and receipt of an affirmative ruling from the Internal Revenue Service that the spin-off will be tax-free to shareholders. It is expected that the spin-off will occur in the fall of 1997, once these conditions are met.

Stewart Bainum, Jr., chairman of the board of Choice, said, "The division into two different companies will enable us to achieve our strategy of separating the owned and managed hotel properties from the pure franchising business, thus allowing each entity to leverage its respective core strengths."

William R. Floyd, vice chairman and chief executive officer, said, "In addition to allowing greater strategic focus, the spin-off will eliminate any perceived conflicts by franchisees with regard to preferential treatment of the company's owned hotels."

The two companies will be run by separate management teams. Floyd will be vice chairman and chief executive officer of Choice Hotels International, Inc. No decisions have been made regarding senior management for the real estate company. Bainum, Jr. will be chairman of both companies.

The companies will have separate boards of directors, except for Stewart Bainum, Stewart Bainum, Jr. and William R. Floyd, who will serve on both boards. After the special dividend, the Bainum family will hold an approximately 32 percent ownership interest in both companies.

Choice Hotels International is the second largest hotel franchisor in the world with 4,089 hotels open and under development representing 350,065 rooms in 33 countries marketed under the brand names Clarion, Quality, Comfort, Sleep, Rodeway, Econo Lodge and MainStay.

The real estate company will own and manage 70 hotels in the United States, with 20 hotels currently under construction or in the development process.