Two of the world's richest men, the Microsoft founder Bill Gates and the Saudi Prince Alwaleed bin Talal al-Saud, have teamed up to make a $3.7bn (£1.9bn) bid for the Four Seasons luxury hotels business.
The pair are backing a management buyout by Isadore Sharp, the company's 75-year-old founder and chairman who built his first hotel in downtown Toronto in 1960.
Mr Sharp tried to portray the deal as an attempt to seal his legacy, with new long-term investors who shared his vision of a chain of mid-sized luxury hotels. But Wall Street pushed shares in Four Seasons higher in the hope that a committee of independent directors may be forced to consider bids from other private-equity buyers.
Shares rose across the hotels sector in the expectation of still more private-equity acquisitions in an industry which is currently booming.
Prince Alwaleed is already Four Seasons' biggest shareholder, with 22 per cent, after aborted takeover talks a decade ago. Mr Gates has 8 per cent through his charity, the Gates Foundation, and his private investment vehicle, Cascade Investment.
If yesterday's takeover bid is successful, Cascade and the prince's Kingdom Hotels International will each emerge with 45 per cent of Four Seasons. Mr Sharp's family trust will hold 10 per cent, and Mr Sharp himself stands to gain a $288m payout from a long-term incentive plan put in place in 1989.
"This proposal achieves all my objectives for Four Seasons and for my family, and is the only one I am prepared to pursue," Mr Sharp said. An architect by training, who began in the construction business with his father, Mr Sharp expanded Four Seasons to meet the growing demands of business travellers. It now operates 71 hotels in 31 countries, with a further 25 properties under development.
Mr Gates, the world's richest man, and Prince Alwaleed, the eighth richest, according to Forbes magazine, have been collaborating for at least two years, when the prince agreed to aid Microsoft's interests in Saudi Arabia and Mr Gates said he would support the prince's projects in the country.
Prince Alwaleed already owns the Four Seasons' George V in Paris among other properties, and in April he led a $3.2bn bid for Fairmont, the Toronto-based hotel chain that manages the Savoy of London.
Yesterday's bid, of $82 per share, is pitched at a 30 per cent premium to Four Seasons' previous closing price and values Four Seasons on a multiple of 44 times its likely 2007 earnings.
Analysts at Deutsche Bank cautioned investors against expecting competing bids for the company, despite the large sums currently available to the booming private equity industry. Bill Lerner told clients: "These multiples are curiously strong, particularly since there is virtually no underlying real estate, and handily exceed the prior high watermark for a going-private transaction in the hotel sector, which was set by Kingdom's acquisition of Fairmont in May. Our sense is that the investor group may have non-financial interests in privatising the company. We also believe the transaction could be part of a broader strategy to ultimately blend the global marketing and distribution of the Four Seasons, Fairmont, and Raffles brands."Reuse content