The board of directors for Rezidor Hotel Group unanimously recommended Monday that shareholders not accept HNA Tourism Group’s mandatory offer of SEK 34.86 (US$3.91) per share to acquire the remainder of the Brussels-based company because it does not reflect the value of Rezidor from a financial perspective. Rezidor further emphasized the increased risks and uncertainties of the potential acquisition.
This news comes after HNA closed on it acquisition of Carlson Hospitality Group, which included 51.3% of the outstanding shares and votes in Rezidor. HNA’s Carlson acquisition triggered an obligation for HNA to make a mandatory tender offer for the outstanding shares in Rezidor.
HNA’s December price offer for the remaining Rezidor shares was 6.3% below the closing price of the Rezidor shares and corresponded to the volume-weighted average price for the Rezidor share during 20 trading days preceding the date. The offer price is the minimum to be paid in the offer in accordance with rulings received from the Swedish Securities Council.
Rezidor stated Monday that its recommendation to reject the HNA offer was based on various assumptions and conclusions made by the board, including:
- Rezidor is in a turnaround process with several measures already taken in order to increase profitability.
- Rezidor has successfully continued to pursue its asset management strategy, reduced its lease exposure and exited several loss-making hotels.
- A cost containment plan with reductions of central costs as well as further increases of procurement efficiencies have been implemented with further expected savings of €10 million (US$10.6 million) per year.
- Adoption of a new transfer pricing model and sustainable tax strategy to reflect recent tax law changes initiated by OECD and EU (BEPS) which will lead to a more normalized tax rate in the future.
- The Board believes that the above measures, together with a consistently strong asset-light development pipeline of rooms, will contribute to improved profitability in the coming years.
Despite unanimously recommending the shareholders not to accept the offer, the board is of the opinion that the uncertainties have increased following HNA Tourism Group’s acquisition of the majority of the shares in Rezidor, including:
- HNA Tourism Group does not state any future plans or strategies of the ownership of Rezidor and hence, the board is not able to fully analyze the offer’s consequences for Rezidor and its other shareholders, particularly in view of HNA Tourism Group’s other interests in the hospitality industry.
- Rezidor’s ownership structure is already concentrated and the liquidity of the share is currently limited. As a result of the offer, the liquidity of the Rezidor share may be further reduced and the ownership structure may become more concentrated, which the board deems would be negative for Rezidor’s other shareholders.
- HNA Tourism Group has not made any public statements regarding the future composition of the board of directors of Rezidor, including directors independent of HNA Tourism Group. The composition of the board will impact the governance of Rezidor, in particular given the comprehensive business arrangements between Rezidor and HNA Tourism Group via Carlson Hotels.