World Watch
By Staff -- HOTELS Magazine, 2/1/2007
NORTH AMERICA
Harrah’s, CNL Mark Privatization Trend
LAS VEGAS/ORLANDO Looks like 2007 already is
shaping up to be a big year on the M&A front, and, led by the
private equity firms, a costly one at that. In late December Harrah’s
Entertainment agreed to be acquired by affiliates of Texas Pacific
Group (TPG) and Apollo Management in an all-cash transaction valued
at approximately US$27.8 billion, the largest-ever transaction
for a gaming company. The deal will take Las Vegas-based Harrah’s,
the world’s largest casino operator, private. Under terms of the
agreement, Harrah’s stockholders would receive US$90 in cash for
each—approximately 190 million—outstanding share, which is a 36%
premium over the casino giant’s closing share price the day before
the initial offer was made. In addition, the firms will assume
the company’s US$10.7 billion debt. According to Thomson Financial,
the deal would be the sixth largest of all time.
“This will be a change in ownership, not a change in direction,”
said Gary Loveman, Harrah’s chairman, CEO and president, in a
statement. But what does it mean for the broader gaming market?
“The Harrah’s transaction will likely lead to a greater following
of the gaming sector by the investment funds, which have not historically
been active participants in this sector for the most part,” offers
Mark Gordon, managing director, Sonnenblick Goldman.
“2007 will also likely be a year in which many of the investment
funds look to the public lodging companies as attractive investment
vehicles given the popularity of the lodging sector and the amount
of capital the funds have to invest. Such large investment vehicles
provide an effi cient way for the investment funds to deploy a
signifi cant amount of capital. Such investments allow for the
opportunity to engineer signifi cant capital appreciation over
the short term.”
And indeed that strategy seems to be becoming a trend, as witnessed
most recently by the mid-January announcement that Morgan Stanley
Real Estate would acquire CNL Hotels & Resorts, the second largest
U.S. REIT. “The CNL/Morgan Stanley/Ashford transaction is evidence
of this trend,” Gordon says. Under terms of this US$6.6 billion
deal, Morgan Stanley would pay US$20.50 per share and the assumption
of debt. Also included in the aggregate purchase price, CNL Hotels
said it would sell 51 properties to Ashford Hospitality Trust
for about US$2.4 billion. Some of the properties in the CNL portfolio
being acquired by Morgan Stanley include the Grand Wailea Resort
Hotel & Spa in Maui and the Arizona Biltmore Resort & Spa, Phoenix.
EUROPE
RBS Sells Marriott Holdings For £1.1B
LONDON North America isn’t the only region kicking
off the new year with acquisitions activity, as Royal Bank of
Scotland (RBS) began the year with its plan to divest its 47 Marriott
hotels in the UK to a consortium led by Quinlan Private. The £1.1
billion deal marks the largest transaction in the UK since Inter-
Continental Hotels Group sold 73 of its Holiday Inn hotels in
March 2005. Under terms of the deal, Quinlan Private will take
a 40% to 50% stake in the portfolio, which includes five hotels
in Scotland, five in London and three in Wales, and other members
of the consortium, Israeli real estate firms Delek Belron International,
Electra Real Estate and Dorea Investments will each take 17%,
9.9% and 3%, respectively.
The hotels, totaling 8,456 rooms, will continue to be managed
by Marriott International under a 30-year contract. RBS acquired
46 hotels of portfolio for £951 million from a Whitbread-Marriott
joint venture in April 2006.
Why the international interest in investing in UK hotel market?
According to a spokesman for Delek Belron, “We truly believe that
the hotel business, especially in Britain, is a very good business
and a developing business. This is a good deal with high potential
and a good management.”
Quinlan Private, led by Dublin-based fi nancier Derek Quinlan,
made its name known when the company purchased the landmark Savoy
Hotel Group for £1.3 billion in 2004. Less than a year later it
sold the Savoy hotel to Prince Alwaleed of Saudi Arabia and RBS.
| EUROPE |
| PARIS Accor, which previously owned a 34% stake in Germany’s Dorint AG, has invested €52 million to acquire control of 52 upscale and mid-scale hotels that were part of Dorint’s network of 93 hotels. As part of the restructuring plan, Dorint’s board will split the company in two, with Accor having controlling interest in one of the companies that operates the 52 hotels. Of the hotels, which generate about €300 million in revenue, eight were previously operated under the joint Dorint Sofitel brand; 17 under the Dorint Novotel brand and 27 under the Dorint Mercure brand. All will be rebranded without the Dorint name attached. By the end of the first half of the year Accor also will buyout the minority interests in the company for €75 million, giving it around a 90% ownership in the new company. Ebertz & Partner has acquired all shares of the second new company and will operate 41 hotels under the Dorint brand. A spokesman for Accor explains that the transaction is a result of Dorint’s continued financial struggles since Accor became a minority shareholder. “When Accor took its first minority stake in Dorint in 2002, it was perfectly aware of the financial situation of Dorint, but Germany has always been a strategic market for Accor,” the spokesman says. The company believes the timing is right to pursue this deal, however, as an economic rebound is beginning in Germany. Further, the acquisition fits with the company’s overall global strategy, emphasizing business-oriented hotels, as the restructuring gives Accor control of predominately business hotels in key cities. “The German market is the second largest in Europe, and Accor cannot ignore it,” the spokesman says. “Germany is also the biggest outbound market and our brands will benefit from more visibility given the repositioning and renovation of our networks. Accor is securing its position in one of Europe’s key markets.” |
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