U.S. Franchise Systems, Inc. Accepts Offer to be Acquired

U.S. Franchise Systems, Inc. announced that it had entered into a definitive agreement with interests of the Pritzker family of Chicago whereby those interests would seek to acquire all of the outstanding common stock of USFS for $5.00 per share, and in a related announcement, by mutual agreement between USFS and the acquiring entities, the termination of the previously announced Recapitalization Agreement.

The Recapitalization Agreement had provided for USFS to self-tender for a portion of its outstanding shares and the Pritzker family business interests to acquire new convertible preferred stock of the company. The offer by Pritzker family business interests to acquire all outstanding shares of USFS would exclude shares already owned by Pritzker family business interests and a material portion of shares owned by the family of Michael A. Leven, USFS's CEO, who will become a shareholder of the acquiring entity upon completion of the offer. The acquisition agreement provides for the acquiring entity to commence a tender offer for any and all of the outstanding common stock of USFS at $5.00 per share and a subsequent merger between USFS and the purchaser in which non-tendering stockholders of USFS would receive the same price. Upon completion of that transaction, Pritzker family business interests, together with Mr. Leven and members of his family, and Steven Romaniello, President and Chief Operating Officer of the company who may acquire shares following the completion of the merger, will own all of the outstanding shares of the company which will no longer be publicly traded.

Mike Leven, CEO of USFS, commented, "This is a win-win transaction for all concerned. It is an attractive offer for our shareholders, and will provide for our franchisees and our employees the continuation of USFS's distinctive approach to the lodging franchise business under the leadership of Steve Romaniello and me, with powerful strategic and financial advantages provided by the ownership and sponsorship of the Pritzker family business interests. This is good news for our shareholders, our franchisees and our employees."

Leven continued, "I'm appreciative of the efforts of our board of directors which devoted considerable time and effort to reach this point, after extensive review of the circumstances and strategic options available to the company. I'm pleased the board found both the form and terms of this transaction to be attractive and clearly in the best interests of our shareholders." Doug Geoga, President of Hospitality Investment Fund, L.L.C., advisor to the acquiring entities, said, "We are pleased to have reached this agreement that will provide a favorable outcome for the existing shareholders while allowing USFS, following the completion of those transactions, to pursue its business with an enhanced focus on the needs of its franchisees. We remain excited at the prospect of working closely with Mike Leven, Steve Romaniello and the dedicated employees of USFS."

It is expected that the tender offer will commence shortly. The consummation of the tender offer and the subsequent merger are subject to customary conditions, including the purchase by the acquirers in the tender of a sufficient number of shares such that they control a majority of the outstanding shares of the company, and expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvement Acts of 1976.

Atlanta-based U.S. franchise Systems Franchises Microtel Inns & Suites, a chain of all newly constructed budget hotels, Hawthorn Suites, a predominantly upscale extended-stay chain, and Best Inns & Suites, an economy/mid-priced chain. The company trades under the symbol USFS on the Nasdaq National Market.