Dealwatch: Hotels

It's been a busy year for hotel M&A.

Inland American Real Estate Trust Inc. said July 26 it would acquire Apple Hospitality Five Inc. in a deal worth a reported $709 including debt, the latest in a string of hotel REIT takeovers this year. The deal comes just weeks after Canada's Legacy Hotels Real Estate Investment Trust announced plans to go private through a $2.4 billion deal with LGY Acquisition LP, a vehicle formed by Cadbridge Investors LP and InnVest REIT. It followed several other such deals:

Continue reading below

• On June 21, Whitehall Street Global Real Estate LP inked a $2.2 billion deal for Equity Inns Inc.
• In April, Eagle Hospitality Properties Trust Inc. was taken private by Apollo Real Estate Advisors, Aimbridge Hospitality LP and JF Capital Advisors LLC in a $701 million deal.
• Days earlier, JER Partners, the private equity arm of real estate investment manager J.E. Robert Cos., acquired Highland Hospitality Corp. — whose holdings run from Hilton to Marriott to Four Seasons — for roughly $2 billion.
• Kicking off April, Winston Hotels Inc. agreed to be acquired by Inland American Real Estate Trust Inc. in a $690 million deal.
• Morgan Stanley Real Estate said Jan. 19 it would pay nearly $6.6 billion to acquire hotel real estate investment trust CNL Hotels & Resorts Inc., marking the latest big-ticket acquisition in a resurging industry.The package includes luxury accommodations in Maui, Hawaii, La Quinta, Calif., and other mild-weather locales in the U.S. Ahead of the deal's close, CNL has agreed to unload 51 hotels to Dallas' Ashford Hospitality Trust Inc. for nearly $2.4 billion.

Meanwhile, Hilton Hotels Corp.'s $26 billion sale to Blackstone Group LP, announced July 3, makes it the latest hotel property group to draw a big-name investor and big money.

Japanese hospitality joint venture IHG ANA Hotels Group Japan has agreed to a $2.4 billion deal with Morgan Stanley for 13 of its hotels. ANA, the product of a December 2006 All Nippon Airways Co. Ltd. and InterContinental Hotels Group plc JV, said it will offer up 13 properties in Japan, where Morgan Stanley tread in February through a joint venture with Starwood Hotels & Resorts Worldwide Inc. The deal kicked off weeks of April hotel dealmaking.

• Lightstone Group LLC announced April 18 it would pay Blackstone Group $8 billion for Extended Stay Hotels.
  • The deal marked the second in a week for an extended-stay hotel group; on April 16, Apollo Investment Corp. said it would pay $1.5 billion for upscale hotelier Innkeepers USA Trust Inc.
• Accord SA said on April 23 it would sell its underperforming Red Roof Inn motel chain to Citigroup Inc.'s Global Special Situations Group and Westbridge Hospitality Fund LP for $1.32 billion.

On Feb. 12, Four Seasons Hotels Inc. accepted a $3.8 billion take-private offer, three months after it was proposed. Bill Gates, through his Cascade Investment LLC; Saudi Arabian prince Alwaleed Bin Talal, through his Kingdom Hotels International; and the company's chairman, chief executive and controlling shareholder Isadore Sharp and his family owned-Triples Holdings Ltd. pooled together to offer $82 a share for the luxe hotelier, which counts 71 properties in 31 countries.

As first proposed, the arrangement doesn't look too shabby for Sharp. He stands to remain chairman and chief executive and to reap about $288 million should the buyout go through, based on a long-term incentive program that was put in place in 1989. Triples would retain 10% ownership in the hotelier. Gates' and Prince Alwaleed's holding companies would split the rest of the shares.

A FARAWAY PLACE TO CALL HOME

The buyout offer for Ontario-based Four Seasons is about a 28% premium to the stock's closing share price Feb. 9 before the proposal was first unveiled. It's a lofty figure, but these three aren't the only rich guys gone shopping in the sector. The overall market for hotels in the U.S. alone is about $100 billion per year, one venture capitalist said a few months ago. Many high bidders are looking far and wide to stake claims. Here's a look at some recent overseas dealmaking:

• In October, Hilton said it would sell two of its largest properties in the U.K. to the Wojakovski family for $780 million.
• In August, Dubai International Capital LLC announced $1.3 billion plans to buy Travelodge Hotels Ltd.
• In April 2006, Kingdom Hotels closed a $3.9 billion deal for Canada-based Fairmont Hotels & Resorts Inc. and announced committing $235 million to hotel development projects in Asia.
  • Later, the Ontario Municipal Employees Retirement System's Oxford Properties Corp. paid $1.3 billion to take seven of the high-end properties involved in the initial deal.
• Also in April 2006, Marriott International Inc. and British leisure group Whitbread plc announced closing their $1.7 billion sale of 46 Marriott hotels in the U.K., held through a joint venture, to Royal Bank of Scotland plc. Months later, Starwood Capital Group Global LLC was named a prospective bidder for Whitbread, which was estimated to be capable of drawing a $5.6 billion buyout.

GIVE ME THE PRIVATE LIFE

Private equity firms have raised substantial funds this year dedicated to real estate and hotel investment, including Blackstone Group, which raised a $5.25 billion investment pool, and Warburg Pincus, which recently announced a $1.2 billion vehicle for real estate. Their intentions seem obvious.

• Deciding late last year it was best to dismantle itself, travel and real estate conglomerate Cendant Corp. undertook a program to split itself off into four units, selling one (a collection of online travel sites to none other than Blackstone for $4.3 billion) and leaving three free-standing entities through a spinoff to shareholders (a car rental biz, a real estate company and a hotel group — Wyndham Worldwide Corp.). For more on the restructuring, see a related Dealwatch.
  • The carve-up's wow factor was modest, at best, and shortly after the spinoffs were complete, famed activist investor Carl Icahn announced raising his stake in Cendant, fueling speculation that one, or more, of the units might be a private equity takeover candidate. —Carolyn Murphy 

Dealwatch executive summary
The Date	The Action
7.13.07	Legacy Hotels accepts $2.4 billion buyout.
7.03.07	Blackstone takes Hilton for $26 billion.
6.21.07	Whitehall Street nabs Equity Inns.
4.24.07	JER Partners will take Highland Hopsitailty private.
4.23.07	Citi, Westbridge pick up Red Roof.
4.18.07	Lightstone takes Extended Stay off Blackstone's hands with $8 billion.
4.16.07	Apollo finds room at the inn.
4.13.07	Morgan Stanely buys 13 hotels in Japan.
4.03.07	Inland wins Winston Hotels.
2.12.07	Four Seasons agrees to take-private offer.
1.19.07	Morgan Stanley bags CNL.
11.06.06	Four Seasons fields $3.7 billion buyout offer.
10.30.06	Warburg Pincus closes $1.2 billion real estate vehicle.
10.23.06	Hilton unloads two U.K. properties for $780 million.
10.04.06	Oxford Properties reclaims seven Canadian hotels for $1.3 billion.
8.21.06	Dubai International announces $1.3 billion buy for Travelodge Hotels.
8.14.06	Carl Icahn ups Cendant stake.
8.01.06	Cendant spins off units. See a related Dealwatch on the carve up.
7.24.06	Starwood named prospective bidder for Whitbread.
6.30.06	Blackstone takes Cendant's Travelcorp for $4.3 billion.
4.19.06	Kingdom Hotels closes Fairmont buy.
4.2006	Marriott and Whitbread sell off $1.7 billion in assets.
Source: The Deal

Post a comment

Name:

Email Address:

URL:

Remember personal info?

Comments: (you may use HTML tags for style)

Please only click "Post" once. It may take a few moments to process.

Deal Video

	Inside The Deal: Cisco Systems' Ned Hooper on raising the bid for Tandberg.
More video...

Elsewhere on The Deal.com

Dealwatch

• Confectioners: Cadbury, Hershey, more
• Airline consolidation, bankruptcy
• AIG Inc.
• AOL

The Deal Magazine

• The kids are all right
• The search for auspiciousness
• Be true to your school
• Waiting to exhale

Corporate Dealmaker

• Microsoft CFO Chris Liddell exiting
• Deal Economy 2010: Cisco's Hooper on Tandberg pursuit
• Deal Economy 2010: IBM's Mendoza on IT services M&A
• Next up on mobile ad acquisitions

The Deal Video

• Deal Economy 2010: AlixPartners' Deedy on retail bankruptcies
• Deal Economy 2010: GE's O'Brien on GE Capital lending
• Deal Economy 2010: Cisco's Hooper on M&A strategy
• Deal Economy 2010: Morgan Stanley's Smith Barney integration

Categories

• Bankruptcy
• Corporate restructuring
• Deal international
• Dealmakers
• Featured
• IPOs
• M&A
• Middle market
• Law & regulation
• Private capital
• Conferences
• Technology

Blog roll

• BloggingBuyouts
• BloggingStocks
• Dealbook
• DealBreaker
• Deal Journal
• FT Alphaville
• footnoted.org
• Going Private
• peHUB
• Reuters Dealzone
• SEC Investor
• Prince Of Wall Street
• Bankruptcy Bill
• Information Arbitrage

Archives

• November 2009
• October 2009
• September 2009
• August 2009
• July 2009
• June 2009
• May 2009
• April 2009
• March 2009
• February 2009
• January 2009
• December 2008
• November 2008
• October 2008
• September 2008
• August 2008
• July 2008
• June 2008
• May 2008
• April 2008
• March 2008
• February 2008
• January 2008
• December 2007
• November 2007
• October 2007
• September 2007
• August 2007
• July 2007
• June 2007
• May 2007
• April 2007
• March 2007
• February 2007
• January 2007
• December 2006
• November 2006
• October 2006
• September 2006
• August 2006
• July 2006
• June 2006
• May 2006
• April 2006
• March 2006
• February 2006
• January 2006
• December 2005