National Golf discloses terms of merger with American Golf

Tuesday, April 2, 2002 | 10:50 a.m.

SUN STAFF AND WIRE REPORT

SANTA MONICA, Calif. -- National Golf Properties Inc. on Monday disclosed terms of a previously announced merger with its primary tenant, American Golf Corp., and said it has extended a forbearance agreement with certain lenders for another month.

Some National Golf shareholders have been nervously awaiting details of the deal because of the ownership links between the two Santa Monica, Calif., companies. National Golf, the nation's largest golf-course owner, is publicly traded, while American Golf is closely held by the founder of both concerns.

Under the agreement, both companies would become subsidiaries of a new holding company that would effectively be owned by current shareholders of National Golf.

American Golf's owners would receive only minimal consideration, along with preferred stock with upside potential if the new company were to thrive. Unlike National Golf now, the new company wouldn't be a real-estate investment trust.

The merger and reorganization agreement includes American Golf affiliates, such as Golf Enterprises Inc. and European Golf LLC.

Completion of the merger is anticipated by the end of September. The new company would be the largest owner and operator of golf courses worldwide, with more than 300 properties in the United States, Britain, Japan and Australia, more than 20,000 employees and annual revenue of more than $700 million.

The deal requires approval of both companies' lenders, who are collectively owed more than $600 million.

American Golf, which operates all but a handful of the courses owned by National Golf, is controlled by David Price and his former wife. They also own about 39 percent of National Golf's stock. They will receive only $10,000 cash and 156,005 common shares in the new company. National Golf's 20.5 million shares and units will be converted on a one-for-one basis into new shares.

"The owners of American Golf looked at this situation and they decided they would go forward by putting their interests in the same boat with the National Golf" shareholders, said Charles S. Paul, chairman of National Golf's committee of independent directors and interim chief executive of National Golf.

The preferred stock gives the Prices an opportunity under a complex formula to increase their ownership in the new company if its stock price moves above $15.

The moves have angered some National Golf shareholders, especially those that rely on dividends. One large holder, Cliffwood Partners LLC, has been seeking additional information about the merger negotiations, and has proposed alternative plans.

Pressure for a change in the relationship between the public and private companies mounted late last year after American Golf said it wouldn't be able to make its lease payments to National Golf.

The general economic decline, along with overbuilding of new courses, hurt the golf business. American Golf defaulted on some debt, which triggered a technical default at National Golf. In February National Golf suspended its dividend, and later said it was planning to acquire American Golf and abandon its REIT status.

National Golf and American Golf operate eight courses in Nevada, including six in the Las Vegas area. National Golf Properties manages the Wildhorse Golf Club in Henderson and the Badlands Golf Club, Painted Desert Golf Course and Las Vegas National Golf Course in Las Vegas.

American Golf Corp. is listed as the manager of the Desert Rose Golf Course and the Las Vegas Golf Club in Las Vegas, the Emerald River Golf Course in Laughlin and the Sierra Nevada Golf Ranch in Genoa.

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