M&C to buy 43 hotels for pounds 438m
Friday 23 April 1999
The deal includes hotels across South-East Asia as well as in Australia and New Zealand and transforms the company into the largest pure hotels group on the UK stock market with 67 locations. It also represents a gamble on the recovery of Asian economies.
The deal is being funded via a pounds 556m, 13 for 20 rights issue priced at 465p per share. CDL, which brought Millennium & Copthorne to the market in 1996 and still owns 52 per cent of the group, is taking up its rights in full. The shares closed 0.5p lower at 579.5p.
Kwek Leng Beng, Millennium & Copthorne's chairman, said the deal would enable the group to compete in a rapidly consolidating market.
He said the number of high profile mergers, combined with the difficulty of buying Asian hotels, had precipitated the deal.
He also said that Asian markets were undervaluing hotel assets and the UK management team was better equipped to run the enlarged chain.
"The deal offers us unprecedented entry into Asian markets which have traditionally been hard to penetrate and, at a time when we are seeing signs of recovery in the region, position us for further international growth," he said.
However, UK institutional shareholders responded with caution, questioning whether the asset swap was more in favour of CDL than minority shareholders.
One said: "At first glance the deal looks expensive and we have not been given the usual asset value by which to judge it. You could say it means CDL is reducing its risk in Asia while giving UK investors a greater exposure."
But Mr Kwek said the deal was being struck at the bottom of the cycle for Millennium & Copthorne shareholders, with Asian economies starting to improve.
John Wilson, the group's chief executive, added: "You have to take your own view as to where we are in the cycle but our belief is that Asia has bottomed out and there are serious improvements to come in that part of the world."
The deal includes eight hotels in Singapore, Malaysia and Indonesia, 31 in Australia and New Zealand with the rest in Taiwan, Hong Kong and the Philippines.
In a trading update, Millennium & Copthorne said the first three months of the year showed steady revenue growth.
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