CDL Makes £776M Buyout Offer for Millennium & Copthorne Hotels

City Developments Limited has launched a £776 million ($989 million) takeover bid for London-listed Millennium and Copthorne Hotels (M&C) that values the Airbnb-challenged hotel chain at £2.2 billion, according to an announcement by the publicly listed flagship of the Hong Leong Group.

This is the second time in less than two years that Singapore-headquartered CDL, which owns 65.2 percent of the shares in the British hotelier, has made an attempt to retake full ownership of the hotel operator it launched in 1995,

Under the terms of the proposal, CDL will pay a maximum cash consideration of £776 million for the 34.8 percent of the shares it does not own, in what would be the precursor to de-listing the hotel group from the London Stock Exchange.

“We believe that a privatised M&C will be in the best position to navigate the increasingly challenging and competitive global hospitality landscape with agility and nimbleness,” said CDL group chief executive officer Sherman Kwek.

Offer Made at 37% Premium

“This final offer provides M&C independent shareholders with the ability to realise their investments in cash at a valuation which has not been seen since 2007,” said M&C’s independent directors who have given the takeover bid their unanimous support.

At 685 pence per share, CDL is offering a 37 percent premium over the stock’s 500 pence pre-offer price, while the share price surged to 675 pence following the announcement. The failed 2017 buyout attempt offered shareholders only a 21.4 percent premium over the company’s 446.7 pence share price at the time.

Key shareholders who had opposed CDL’s unsuccessful 2017 buyout attempt, including US investment firms International Value Advisers and MSD Capital as well as Lichtenstein-based Classic Fund Management, have already given the buyout their binding approval.

With shareholders representing 43.58 percent of the shares not controlled by CDL already on-side, the property developer controlled by Singapore’s billionaire Kwek clan could reach the approval threshold of 50 percent of independently held shares by winning over shareholders owning just over six percent of the stock not held by CDL.

Aiming for Avenues to Sell Assets

CDL hopes to enhance its control of Millennium & Copthorne after the hospitality firm, which operates hotels in Asia, Europe, the Middle East, New Zealand and the US ,saw its pre-tax profits drop from £29 million in the last three months of 2017 to £7 million for the same period of 2018, as it competes with online travel agencies and faces the challenges of Brexit.

“M&C will be able to leverage CDL’s significant resources, comprehensive real estate capabilities and global network to reposition its assets and drive sustainable hotel performance,” said Kwek.

M&C, which operates the Millennium, Grand Millennium, Copthorne and Kingsgate brands, has a portfolio of over 130 hotels in 17 countries, and accounted for 49 percent of CDL’s revenue in the first half of 2017, according to an analysis cited by Reuters.

The hotel owner and operator said in Friday’s announcement that shareholders would only be able to benefit from the repurposing or sale of M&C assets if the company is de-listed.

2019 a Sweeter Year for Minority Shareholders

In  October 2017, CDL made its first unsuccessful bid to buy out the hotel chain, offering to pay £624.3 million for the remaining 34.8 percent shareholding.

Under the terms of that proposed buyout, shareholders in the hotel chain would have received 545 pence per share, plus a special dividend of 7.5 pence per share.

The offer was subsequently sweetened to 600 pence after failing to find support from shareholders, but lapsed in January 2018 when it received valid acceptances from only 47.1 percent of shared capital not already owned by CDL.

After founding Millennium Hotels in 1989, CDL took M&C public in 1996 after purchasing the Copthorne hotel chain from Ireland’s Aer Lingus.