24th Jun 2008 10:04
|
For Immediate Release |
24 June 2008 |
Millennium & Copthorne Hotels plc
"Disposal of Millennium Seoul Hilton - Profit of £155 m"
Millennium & Copthorne Hotels plc ("M&C") announces that CDL Hotels (Labuan) Limited (the "Company") ( a wholly-owned subsidiary of M&C) has entered into an agreement (the "Agreement") with Kangho AMC Co. ("Kangho") pursuant to which the Company has agreed to dispose of its 100% holding in the issued share capital in CDL Hotels (Korea) Limited (the "Disposal").
CDL Hotels (Korea) Limited owns the hotel business undertaking of the Millennium Seoul Hilton Hotel which is located at 395, 5-ga, Namdaemun-ro, Chung-gu, Seoul, Korea (the "Hotel"). The Company and Kangho have attributed a value of KRW 580.0 billion (or approximately £287.9 million, based on an exchange rate of £1 to KRW 2014.9) for the Hotel. After taking into account other net liabilities of CDL Hotels (Korea) Limited as at 31 December 2007 (including the shareholder's loan amount owed by CDL Hotels (Korea) Limited to the Company, referred to below), the total sale consideration for the 100% holding in the issued share capital in CDL Hotels (Korea) Limited has been agreed at KRW 468.6 billion (or approximately £232.6 million) (the "Sale Consideration").
On execution of the Agreement, Kangho has wire transferred to the Company a deposit in an amount equivalent to KRW 58.0 billion in US dollars (or approximately £28.8 million). The remainder of the Sale Consideration will be paid in cash to the Company at completion, subject to certain completion adjustments including inter alia profit for CDL Hotels (Korea) Limited for the period commencing on and including 1 January 2008 to completion of Disposal.
The M&C group's purchase price of the Hotel was US$228.5 million (or £144.6 million based on historical exchange rates) in 1999.
For the year ended 31 December 2007, the profit before tax of CDL Hotels (Korea) Limited was £8.2 million1 and the gross assets of CDL Hotels (Korea) Limited as at 31 December 2007 amounted to approximately £147.2 million1.
Completion under the Agreement is subject to the satisfaction or waiver of certain conditions precedent, including the approval of the shareholders of M&C. A circular will be posted to shareholders in due course and the extraordinary general meeting to approve the transaction contemplated by the Agreement is expected to take place in August 2008. On completion of the Disposal, which is expected to occur in September 2008, the Hotel will cease to be branded as a "Millennium" hotel and the M&C group will cease to have any management responsibility for, or economic interest in, the Hotel.
Following completion under the Agreement, Kangho will procure CDL Hotels (Korea) Limited to repay a shareholder's loan amount owed by CDL Hotels (Korea) Limited to the Company, which for reference purposes, as at 24 June 2008 amounted to KRW 38.5 billion (or approximately £19.1 million). In addition, Kangho shall be responsible for all other debt obligations and liabilities of CDL Hotels (Korea) Limited on and after the date of completion of the Agreement.
Based on the values contained in the M&C consolidated balance sheet as at 31 December 2007, the Disposal is expected to result in a pre-tax profit on disposal of £ 155.0 million.
The cash proceeds received by the Company following the disposal of CDL Hotels (Korea) Limited and the repayment of the shareholder's loan amount owed by CDL Hotels (Korea) Limited to the Company will be used to increase cash reserves in order to fund acquisition opportunities that may arise, earn interest income and reduce debt where appropriate.
Chairman Kwek Leng Beng said:
"The sale value attributed to the Hotel demonstrates once again the underlying management skill of our group in maximising shareholder value. The M&C group's strategy of being an owner of hotel assets remains unchanged. However, the opportunity for sale, whilst unsolicited, further strengthens the M&C group's ability to take advantage of market and cyclical opportunities."
Richard Hartman, Chief Executive, said:
"Seoul is a key gateway city and this will present us a more difficult decision on divestment. While the city has a challenging hotel operating environment particularly in Millennium Seoul Hilton, we have managed to achieve a profitable exit from the investment. We will be maintaining a constant watch for suitable opportunities as they may arise in Korea."
1, The profit and gross assets of CDL Hotels (Korea) Limited as stated are as prepared under IFRS for group consolidation purposes and are
not as reported under local GAAP.
Enquiries:
From 8am
Buchanan Communications Tel: +44 (0) 20 7466 5000
Tim Anderson/Charles Ryland/Rebecca Skye Dietrich
From 12 pm
Millennium & Copthorne Hotels plc Tel: +44 (0) 20 7872 2444
Richard Hartman, Chief Executive Officer
Beng-Lan Low, SVP Finance / Alan Chapman, Head of Finance
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Millennium & Copthorne Hotels