10th Mar 2005 07:02
InterContinental Hotels Group PLC10 March 2005 INTERCONTINENTAL HOTELS GROUP SALE OF 73 HOTELS IN UK FOR £1 BILLION; FURTHER RETURN OF FUNDS InterContinental Hotels Group PLC ("IHG") today announces subject to, interalia, EU merger clearance: • the sale of 73 hotels with management contracts (with estimated fees of £12m per annum in the first full year) enabling IHG to maintain its strong UK market position and Holiday Inn brand distribution. The buyer is LRG Acquisition Limited, a consortium comprising Lehman Brothers Real Estate Partners, GIC Real Estate and Realstar Asset Management ("LRG"). • a sale price of £1bn before transaction costs; £960m in cash and £40m deferred contingent cash consideration compared with a net asset value for the hotels of £1,022m; and • subject to completion of the sale, a proposed further £1bn return of funds to shareholders in conjunction with a capital restructuring. IHG has agreed to sell 73 hotels in the UK to LRG at a sale price of £1bn incash. Receipt of £40m of the total proceeds has been deferred, contingent uponcertain pre-agreed performance targets being reached. The proceeds from this andother recent hotel disposals will be used to return funds to shareholders, tofund investment in the business and to pay down debt. The sale is expected tocomplete in the second quarter of 2005. The 73 hotels to be sold (12,841 rooms) were placed on the market in September2004 as part of IHG's continuing asset disposal programme and have a net assetvalue of £1,022m. They consist of 4 Crowne Plaza hotels, 68 Holiday Inn hotelsand 1 Express by Holiday Inn hotel. The hotels include a core portfolio of 63hotels and a secondary portfolio of 10 hotels. In addition to the consideration,LRG has agreed to invest an incremental £21m of improvement capital in the coreportfolio. The core portfolio of 63 hotels will continue to be managed and branded by IHGunder 20 year management contracts with LRG. IHG has two consecutive options toextend the contracts on the core properties for 5 years each, giving a totalpotential contract length of 30 years. For the secondary portfolio of 10hotels, which represent only 5% of the EBITDA of the whole portfolio, if LRGwishes to maintain an IHG brand on the properties after 2007, they must investin the properties to comply with brand standards. IHG is now proposing a further £1bn return of funds to shareholders. This willrequire a capital restructuring to enable the release of funds. Details of thecapital restructuring and proposed method of returning funds will be containedin a Circular to be sent to shareholders in due course. Subject to necessaryapprovals, including from shareholders, completion of sale transactions andthere being no material adverse change in market conditions, it is intended tocomplete the restructuring by the end of June 2005 and to return funds toshareholders as soon as practicable thereafter. Since Separation in April 2003, including today's announcement, IHG has sold oragreed to sell 121 hotels with proceeds of £1.75 bn, close to net book value,and announced the return of £2bn of funds, of which £767m has been returned. Richard Solomons, finance director of IHG, commenting on the transaction andreturn of funds said: "This is a significant step forward in the execution of our strategy and we haveachieved attractive management contracts. These long term contracts give usexcellent continued representation for Holiday Inn in the UK, one of our mostimportant markets globally, and illustrate our strength as one of the leadinghotel management companies in the world. Our strategy of focusing on branding,franchising and managing hotels continues to generate significant value forshareholders. We can now operate with a significantly lower capital base. I amvery pleased to be able to announce the return of a further £1bn toshareholders, taking to £2bn the total we have committed to return, andenhancing our return on capital employed as a result." Mark H. Newman, Managing Director, Lehman Brothers Real Estate Partners LPadded: "We are very pleased to acquire this portfolio from InterContinental HotelsGroup plc and look forward to working together with them and our joint venturepartners GIC Real Estate and Realstar Group." Dr Seek Ngee Huat, President of GIC RE said,: "We are delighted to be extending our global hotel portfolio in this venturewith our partners Lehman Brothers Real Estate Partners and Realstar as well asthe strong IHG brands." Jonas Prince, Chairman of Realstar Group said: "This acquisition represents a significant opportunity for us as theseproperties offer tremendous value in terms of real estate and brand equity. Weare excited to be working in tandem with our joint venture partners and IHG toensure the continued integrity and viability of these properties." Transaction details 1. The buyer is LRG Acquisition Limited (a consortium comprising Lehman BrothersReal Estate Partners, GIC Real Estate and Realstar Group) 2. Net asset value of hotels sold of £1.02bn comprising net book value of£1.08bn offset by deferred tax liabilities in the companies sold of £57m. Allnumbers are stated under UK GAAP for simplicity and consistency. 3. The P&L tax charge and cash tax payable on this transaction is not expectedto exceed £5m 4. Expected management fees are initially in the region of £12m in the firstfull year, with additional incentive fees potentially payable thereafter. 5. UK sale transaction conditional upon, inter alia, EU merger clearance; returnof £1bn of funds conditional upon, inter alia, shareholder approval, completionof disposal transactions and no material adverse change in market conditions. 6. Receipt of the deferred proceeds is contingent on meeting performance targetsin 2005, 2006 and 2007. Proceeds are also subject to a working capitaladjustment on completion. 7. Since Separation in April 2003, including today's announcement, IHG will havesold 121 hotels with proceeds of £1.75bn, almost half the hotel assets owned atSeparation in April 2003. 16 properties remain on the market with a net bookvalue of £360m. 8. Sales announced today: 73 hotels, 12,841 rooms, proceeds of £1.0bn: 2004 2003 £ £Revenue 342 322EBITDA 107 95EBIT 69 60 Note: Profits before allocation of interest and tax Hotel Location RoomsIC Austin US 189IC Central Park South US 208IC Chicago US 807IC Houston US 485IC Miami US 641IC San Juan Puerto Rico 402IC Toronto Canada 210IC Mayfair UK 289CP Amsterdam Netherlands 174CP Hilton Head US 340CP Los Angeles Airport US 613CP Redondo Beach US 346CP White Plains US 401CP Midland Manchester UK 303CP Vanuatu Vanuatu 140HI Anaheim US 264HI Atlanta Airport US 190HI Memphis US 243HI South Bend US 229HI Gatwick Crawley UK 217HI Middlesbrough/Teeside UK 134HI Preston UK 129HI Plymouth UK 112HI Sheffield West UK 138HI Swansea UK 106 Location RoomsHI Adelaide Australia 193HI Darwin Australia 183HI Newcastle Australia 72SBS Alpharetta US 118SBS Anaheim US 143SBS Atlanta Perimeter US 143SBS Auburn Hills US 118SBS Austin US 121SBS Boston US 133SBS Burlington US 141SBS Carmel Mountain US 116SBS Charlotte US 117SBS Columbia US 118SBS Denver US 115SBS Eatontown US 131SBS Fort Lauderdale US 141SBS Houston Galleria US 93SBS Myrtle Beach US 119SBS Portland US 117SBS San Antonio US 118SBS Sorrento US 131SBS Toronto Markham Canada 120Posthouse Epping UK 79UK Portfolio UK 12841Total 121 23,031 For further information, please contact: Investor Relations (Gavin Flynn/Paul Edgecliffe-Johnson) +44 (0) 1753 410 176 +44 (0) 7808 098 972Media Enquiries (Leslie McGibbon) +44 (0) 1753 410 425 +44 (0) 7808 094 471 Notes to Editors InterContinental Hotels Group PLC of the United Kingdom (LON:IHG, NYSE:IHG(ADRs)) is the world's most global hotel company and the largest by number ofrooms. InterContinental Hotels Group franchises, manages, leases or owns,through various subsidiaries, more than 3,500 hotels and 534,000 guest rooms innearly 100 countries and territories around the world. The Group owns aportfolio of well recognised and respected hotel brands includingInterContinental(R) Hotels & Resorts, Crowne Plaza(R) Hotels & Resorts, HolidayInn(R) Hotels and Resorts, Holiday Inn Express(R), Staybridge Suites(R),Candlewood Suites(R) and Hotel IndigoTM, and also manages the world's largesthotel loyalty program, Priority Club(R) Rewards, with more than 23 millionmembers worldwide. In addition to this, InterContinental Hotels Group has acontrolling interest in Britvic, the second largest soft drinks manufacturer inthe UK. For the latest news from InterContinental Hotels Group, visit our online PressOffice at www.ihgplc.com/media Lehman Brothers (ticker symbol: LEH), an innovator in global finance, serves thefinancial needs of corporations, governments and municipalities, institutionalclients, and high net worth individuals worldwide. Founded in 1850, Lehman Brothers maintains leadership positions in equity and fixed income sales, trading and research, investment banking, private investment management, asset management and private equity. The Firm is headquartered in New York, with regional headquarters in London and Tokyo and operates in a network of offices around the world. For further information about Lehman Brothers' services, products and recruitment opportunities, visit our Web site at www.lehman.com. Lehman Brothers Real Estate Private Equity currently includes Lehman BrothersReal Estate Partners (LBREP), a full-service real estate merchant banking fund.This global real estate fund makes direct private equity investments inproperties, real estate companies and service businesses ancillary to the realestate industry primarily in North America and Western and Central Europe, aswell as in other international markets. LBREP is an extension of LehmanBrothers' real estate franchise, which has a long and successful track record ofadvising, underwriting and investing in over $100 billion of real estatetransactions over the past three years. By the end of the first fund's Commitment Period in November 2004, LBREP hadcommitted more than $1.8 billion in equity across 66 transactions in 26 statesin the U.S., seven European countries, Puerto Rico and Canada, including, forexample, the diversified Tornet Portfolio in Sweden and the WTF (Swisscom)Portfolio in Switzerland. GIC RE Headquartered in Singapore, GIC RE Is the real estate investment arm of theGovernment of Singapore Investment Corporation (GIC) that manages the foreignreserves of Singapore. The company manages a multi - billion dollar portfolioof direct and indirect property investments worldwide. For more informationplease visit our website at www.gicre.com Cautionary note regarding forward-looking statements This announcement contains certain forward-looking statements as defined underUS law (Section 21E of the Securities Exchange Act of 1934). Theseforward-looking statements can be identified by the fact that they do not relateto historical or current facts. Forward-looking statements often use words suchas ' target', 'expect', 'intend', 'believe' or other words of similar meaning.By their nature, forward-looking statements are inherently predictive,speculative and involve risk and uncertainty. There are a number of factors thatcould cause actual results and developments to differ materially from thoseexpressed in or implied by such forward-looking statements. Factors that couldaffect the business and the financial results are described in "Risk Factors" inthe InterContinental Hotels Group PLC Annual Report on Form 20-F filed with theUnited States Securities and Exchange Commission. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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