Bid for Australia/NZ chain at 32% discount to NTA
US investment bank Babcock & Brown, in the midst of trying to take over the troubled MTM Entertainment Trust and its management company, has launched a joint-venture bid for Australia’s largest hotel-owning company, Tourism Asset Holdings Ltd, at a 32% discount to asset backing.
Babcock & Brown held 17.9% of the company at the 31 December balance date, compared to Accor Asia Pacific’s 36.3%. Latest disclosures show Babcock & Brown has 19.9% of TAHL and its partners — GPG (Sir Ron Brierley & Gary Weiss) and Jagen Pty Ltd (controlled by Boris Liberman) — another 4.6%. They want to increase the hotel company’s gearing, already about 70%, but said it should then not be a listed company.
Tourism Asset Holdings was listed seven years ago as owner of some of the Accor Asia Pacific portfolio of hotels. After an asset restructure last year, it holds 47 hotels, six of them in New Zealand, and all Accor brands.
The New Zealand portfolio is made up of the twin Ibis and Novotel at Ellerslie, another Ibis in Wellington, and the Novotels Auckland, Wellington and Queenstown (its website lists the Auckland one, on Customs St, as being in New South Wales). The flagship is the Novotel Darling Harbour in Sydney.
75c bid premium to market but big discount to nta
The takeover bid is at A75c/share, compared to asset backing of A110c following TAHL’s balance sheet restructure and share buyback. The bid values Tourism Asset Holdings at $A205.6 million.
The shares opened the day at A66c and closed at A72c. They were down around A55-60c last year, jumping A10c to about A67c in December after the restructure began.
The company completed its share buyback in March with 94% acceptance, buying 16.05% of every holding at A85c/share. An $A31.4 million revaluation of the portfolio at 31 December raised asset backing A10c to $A1.06, and the buyback raised that backing to $A1.10.
Tourism Asset Holdings made an $A19 million profit last year, including no abnormals, compared to $A18.2 million including $A6.1 million of abnormals in 1999. The whole profit was paid out in dividends.
Structural change began in 1999
The company began its major structural change at the end of 1999, when it turned a management agreement on the Accor hotels into leases, got a rental guarantee from the parent Accor SA, and got subordinated debt funding from Accor.
Babcock & Brown and other parties, through a trustee company, Bainton Pty Ltd, made their offer conditional on gaining more than 50%, Accor agreeing to a new underwriting agreement on up to $A65 million of unsecured debt to replace the existing $A40 million equity underwrite in the event that Tourism Asset Holdings’ $A320 million debt facility isn’t repaid on maturity.
Accor said it regarded the offer as opportunistic, but would abide by the wishes of minority shareholders. However, Accor also said it would need to know more about Babcock & Brown’s plans, particularly on refinancing, before considering any proposal.