DATE: Thursday, November 27, 1997           TAG: 9711270665

SECTION: BUSINESS                PAGE: D1   EDITION: FINAL 

SOURCE: BY TOM SHEAN, STAFF WRITER 

DATELINE: VIRGINIA BEACH                    LENGTH:   65 lines

THE BUYOUT BEGINS: JACKSON HEWITT STOCKHOLDERS OFFERED $68 FOR EACH SHARE

HFS Inc., the lodging and real estate company that last week announced an agreement to buy Jackson Hewitt Inc. for $480 million, has begun shopping for shares of the tax-preparation service.

In an agreement approved by Jackson Hewitt's board, HFS has offered $68 in cash for each of Jackson Hewitt's 6.66 million common shares and 440,684 shares reserved for stock options.

HFS is likely to have little difficulty gaining control of the Virginia Beach-based company. In a recent filing with the Securities and Exchange Commission, HFS said Jackson Hewitt executives and directors with control of over 817,593 shares have agreed to sell their shares to HFS.

HFS said last week that it sought to acquire Jackson Hewitt because it saw prospects for significant growth in Jackson Hewitt's business and an opportunity to market tax-preparation services through other HFS operations.

HFS, based in Parsippany, N.J., is a major provider of lodging and real estate brokerage franchises. Its roster of hotel franchises includes Ramada, Days Inn and Howard Johnson. It also distributes franchises of Century 21, ERA and Coldwell Banker real estate brokerages.

Through a network of franchisees and company-owned offices, Jackson Hewitt provides tax-preparation services, electronic filing and loans on tax refunds.

HFS said in its filing with the Securities and Exchange Commission that Jackson Hewitt chairman, president and chief executive officer Keith E. Alessi will continue to serve as president and CEO after the proposed merger.

Alessi, it said, will be paid an annual salary of $300,000 and will be eligible for as much as $300,000 in bonuses if Jackson Hewitt reaches certain targets. In addition, Alessi will receive a non-qualified option to buy 124,838 common shares of HFS.

Under an existing employment agreement with Jackson Hewitt, Alessi receives an annual salary of $250,000 and is eligible for as much as $137,500 in bonuses if certain objectives are met.

HFS also disclosed that it will pay Jackson Hewitt director Harry W. Buckley an annual salary of $90,000 for serving as a consultant to Alessi and working as many as two days a week.

Buckley, who joined the Jackson Hewitt board in January, had been president and CEO of the country's largest tax-preparation service, H&R Block Tax Service Inc., from 1988 to 1995.

HFS said it will pay $250,000 each to two individuals who identified Jackson Hewitt as a merger candidate and assisted HFS with the transaction. One of the individuals is the son of an HFS director. The other person is an associate of Chiefton Capital Management Inc., owner of 143,550 Jackson Hewitt shares.

In a separate filing with the SEC, Jackson Hewitt described three months of merger talks that led up to the agreement with HFS. The lodging and real estate concern, it said, intially offered to buy each of Jackson Hewitt's shares for a combination of cash and HFS stock valued at $59. HFS later agreed to pay cash and to raise its offer.

Under Virginia law, HFS would be able to gain control of Jackson Hewitt without a vote by Jackson Hewitt shareholders if it acquires at least 90 percent of the company's stock.

HFS said its offer to buy Jackson Hewitt shares will expire Jan. 5, but could be extended. An expiration date in 1998 would provide Jackson Hewitt shareholders with leeway for paying taxes on the capital gains they are likely to have from selling their shares. ILLUSTRATION: Color photo

STEVE EARLEY, file photo

Keith E. Allessi...

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