Kadoorie Family Boosting Hongkong and Shanghai Hotels Stake for $338M

Hong Kong billionaire Michael Kadoorie has agreed to pay a steep premium to increase his family’s majority stake in Hongkong and Shanghai Hotels Ltd from 59.98 percent to 72.43 percent through an off-market share purchase totalling HK$2.63 billion ($337.5 million).

The purchase price values the shares at HK$12.80 each, HSH said in a filing with the Hong Kong stock exchange released Monday morning, or almost double the closing price of HK$6.65 in last Friday’s trading session. Shares shot up Monday on the news to close at HK$7.98, a 20 percent rise, and were still trading north of HK$7.90 on Tuesday afternoon.

Kadoorie serves as non-executive chairman of the 155-year-old group, which owns the Peninsula hotel chain and various property and services businesses, including the Peak Tram in Hong Kong. The sellers of the shares were identified as Seekers Capital Group, a local asset management firm, and other “undisclosed persons”.

According to Monday’s announcement, completion of the deal is conditional on the Kadoorie family obtaining a waiver from the mandatory takeover offer triggered by the size of the purchase. The deal will terminate if the waiver is not obtained by 31 March, unless the parties agree to extend the date.

Shaky Profit Recovery

The announcement offered no clues to the thinking behind the move by the octogenarian Kadoorie, whose family interests also include a 35 percent stake in Hong Kong electricity provider CLP. Forbes estimates the tycoon’s wealth at $7.5 billion.

With HSH’s global portfolio of 10 Peninsula hotels struck by the COVID-19 pandemic and the resulting travel restrictions, the group saw earnings before interest, tax, depreciation and amortisation swing from HK$1.39 billion in 2019 to a loss of HK$61 million in 2020.

A cost-savings programme enabled HSH to eke out EBITDA of HK$35 million in the first half of 2021 after a year-earlier loss of HK$114 million, but the period “remained a most challenging time”, according to the group’s interim report issued last August.

“The bulk of our group’s earnings are usually derived from our home market of Hong Kong and, whilst infection rates remained low here, the stringent social distancing rules and ban on international travel imposed by the Government due to COVID-19 concerns continued to impact not only The Peninsula Hong Kong, but also the Peak Complex and our residential leasing business,” the report said.

Seeking the Exit

Seekers Capital obtained its HSH stake in 2018 when the low-profile firm, then known as Satinu Resources Group, paid nearly HK$2.36 billion for an 11.47 percent interest held by Satinu-controlled Tai United Holdings. Seekers will cease to have any shareholding in HSH upon completion of its stake sale.

The Kadoorie family first opened Hong Kong’s Peninsula Hotel in 1928 after many decades of activity in Greater China’s banking, agricultural, property and utility industries.

The family of Sephardic Jews from Baghdad had settled in Shanghai in the 1880s and came to own many properties in that city, including the Astor House Hotel, the Majestic Hotel and a marble mansion that served as their residence and today is better known as the China Welfare Institute Children’s Palace.

The HSH property empire spans Peninsula hotels in Hong Kong, Shanghai, Beijing, Tokyo, Bangkok and Manila, as well as in the US and Europe, plus commercial properties including The Repulse Bay, a mixed-use residential and retail development, and The Peak Tower shopping mall.