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InterContinental Hotels Group (IHG) on Thursday announced that it has received a binding offer from Constellation Hotels Holding to acquire the 470-room InterContinental Paris.
InterContinental Hotels Group (IHG) on Thursday announced that it has received a binding offer from Constellation Hotels Holding to acquire the 470-room InterContinental Paris – Le Grand for €330 million (US$442 million), or (~US$940,400/key), payable in cash at completion. Constellation, which recently purchased the InterContinental London Park Lane and a majority interest in InterContinental New York Barclay, has made a further commitment to invest over time an estimated €60 million (US$80 million) in future Paris hotel renovations. Since this is not an agreement to sell the hotel, the final sale price and terms of the deal could change prior to closing. "While the disposition announcement is much sooner than we expected, some investors could be a bit disappointed with the sales price as expectations have been heightened in anticipation of an 'eye-popping' per-key price, especially considering several US$1million+/key transactions that have occurred recently in major gateway markets," said David Loeb, analyst with R.W. Baird. The terms of the offer are such that IHG would retain a 30-year management contract on the hotel, with three 10-year extension rights at IHG’s discretion, giving an expected contract length of 60 years. Management fees are expected to be approximately €4 million (US$5 million) per annum. The hotel has operated under the InterContinental brand since 1982. In 2013, it generated revenues of US$118 million and EBIT of US$22 million, and as of June 30 it had a net book value of US$342 million. Cash taxes payable on the potential transaction are not expected to exceed US$5 million. Loeb said he expects InterContinental to return the proceeds to shareholders, most likely via a special dividend. Following receipt of the offer, IHG has agreed to a period of exclusivity with Constellation, and, in line with applicable French legal requirements, IHG will enter into an information and consultation period with the relevant employees’ representatives. A further announcement will be made in due course. |
