NH’s Board Will Assess Potential Merger with Barceló on 20 December

2 December 2017 – Expansión

Advisors / NH Hotel Group and Grupo Barceló have made initial contact through their advisor banks, Merrill Lynch and Banco Santander, respectively.

Progress is being made in what is shaping up to be the mega-operation of the decade in the hotel sector in Spain. The members of the most senior governing body of NH Hotel Group have agreed to meet on 20 December to study a possible merger with the firm’s rival Grupo Barceló.

At the meeting, NH’s Board of Directors will address the proposal made by its rival to integrate the businesses of the two groups and create a “national giant” with more than 600 hotels and 109,000 rooms around the world. This hotel giant would be controlled by Barceló (60% stake), and the current shareholders of NH would hold the remaining 40% share, as Expansión revealed on 20 November.

NH’s directors will consider preliminary reports from Merrill Lynch at this first meeting. The bank has been chosen by the hotel group’s management committee to analyse the operation.

The letter signed by Simón Pedro Barceló, Co-President of Grupo Barceló’s Board of Directors, is dated 14 November, which is when NH’s Board of Directors last met to approve the firm’s quarterly accounts. Nevertheless, the operation in question was not discussed at that meeting.

In his letter, Barceló proposed a period of up to three months to complete the preliminary work and submit a transaction proposal for approval by the governing bodies of both companies. Barceló, which in its offer letter values NH at €2,480 million, has engaged Banco Santander to analyse the operation. The financial advisors of the two companies are now in contact.

Stock price increase

NH’s shares have soared in value by more than 20% since Barceló announced its intention to integrate the two companies.

Barceló’s proposal values each NH share at €7.08, which would represent a premium of 17% over the current list price of €6.03. The endorsement of the market for this operation, as well as the first valuations of the advisor bank, will be one of the matters that the members of the Board will take into account.

NH’s most senior governing body is chaired by Alfredo Fernández Agras, who represents the British fund Oceanwood (which holds a 12% stake in NH). Moreover, its members include Ramón Aragonés –CEO of NH–, José Antonio Castro Sousa and Jordi Ferrer Graupera, both representatives of Hesperia.

The group chaired by Castro – a priori, one of the people who is most opposed to the agreement – announced on Monday that it had early repaid a loan granted by Santander for €122.7 million guaranteed by 31,870,384 NH shares, representing 9.1% of the share capital (its stake in the group).

To repay that loan, which was due to expire on 23 December 2017, the company has signed a new financing agreement with Société Générale for €97.55 million, guaranteed by the same shares, explain financial sources to Expansión.

By contrast, HNA does not have any representatives on the Board of Directors, even though it is the company’s largest shareholder, with a 29.5% stake.

The Chinese conglomerate was expelled in June 2016 due to a conflict of interest after it made an agreement to buy Carlson Rezidor, which competes with the Spanish firm in several European countries.

In its place, Paul Daniel Johnson, Fernando Lacadena Azpeitia, María Grecna and José María Cantero de Montes-Jovellar were appointed, at the request of the funds, to serve as independent directors. José María López-Elola González and José María Sagardoy also feature in that category.

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake

Hotelier Catalonia Leads Ranking of Spain’s Top 15 Tourism Companies by Gross Margin

24 November 2017 – Preferente

Catalonia, the hotel chain based in Barcelona and owned by the Vallet family, leads the first ranking compiled by preferente.com of the Top 15 Spanish tourism companies by gross margin in 2016, with a 30.2% gross profit on its sales. It is followed by large hotel chains such as the Ibiza-based Palladium, and the Mallorcan-based Grupo Piñero and Riu, which all generated gross margins of more than 20% during the last financial year.

The chain owned by the Matutes family is the second in the ranking after obtaining an estimated gross margin of 28.6% on its sales in 2016; it is followed by the group owned by the Piñero family, which includes the Bahía Príncipe and Soltour businesses, with a gross margin of 24.2%; and the chain owned by the Riu family, with a gross margin of 23.8% and the leader of the ranking by EBITDA.

Completing the Top 5 is another large chain and another Catalan firm: H10, which recorded a gross profit on its sales of 19.8% in 2016, followed by Grupo Barceló, with a gross margin of 14.2%, which would have been greater if it did not include in its sales the intermediation activity of Ávoris, which generates higher volumes but lower margins.

After Group Barceló in the ranking comes Grupo Iberostar, which comprises Almundo and World2Meet; and then the hotel groups NH and Meliá, which all exceeded or equalled a gross profit of 10% of sales in 2016. After those companies come the Canarian firm Lopesan and the Catalan firm Hotusa, which groups together Keytel and Restel, with similar gross margins of around 9% over sales.

A vertically integrated tourism group: an airline, a travel agency and a bed bank follow them in the ranking. At number 12 is Globalia, the parent company of Air Europa and Halcón Viajes, with a gross margin of 3.8% of sales, followed very closely by Iberia (3.7%) and Viajes El Corte Inglés (2.4%). The B2B firm Hotelbeds appears in fifteenth place with an estimated gross margin of 2% in 2016, a year when it had not yet completed the purchase of Tourico and GTA, the first of which generates significant EBITDA.

In this way, according to the ranking prepared by the leading tourism website, the chains with the greatest presence in the Caribbean and those dedicated exclusively to resorts are those that generate the greatest gains with respect to their revenues. Meanwhile, the conglomerates that also include intermediaries would have higher gross margin figures if they only reflected their hotel businesses, given that although they invoice less, they are more profitable.

Original story: Preferente (by Andrea Bulla)

Translation: Carmel Drake

Barceló Offers €2.48bn For NH & Sets 3-Month Negotiation Period

21 November 2017 – Expansión

To create a hotel colossus with more than 600 hotels and 109,000 rooms in Europe, Latin America and the USA, and one of the largest tourism companies in Spain. With this objective in mind, the Barceló group has initiated contact with the NH Hotel Group to propose one of the largest hotel mega-operations in recent years in Spain.

Barceló is offering a swap equation that involves valuing each NH share at €7.08. In other words, it is willing to pay €2.48 billion for the company in total. That valuation represents a premium of 27% over the group’s average share price during the three months leading up to 30 October, of €5.56. Moreover, that premium rises to 41% if we consider the company’s closing price last Friday of €5.

Yesterday at 12:30, Spain’s National Securities and Exchanges Commission (CNMV) lifted the suspension on trading that had been weighing down on NH’s shares, but the avalanche of purchase orders meant that it took another 45 minutes for the shares to actually start trading again. By the close of business, NH’s list price had soared by 11.8%, to €5.59. In this way, its market capitalisation rose from €1,751 million on Friday to exceed €1,950 million. So far this year, the hotel company has seen its share price rise by more than 46%, however, it is still well below the €14.70 per share that it reached in 2007, at the height of its stock market boom.

Barceló submitted to the CNMV a letter sent by Simón Pedro Barceló, Co-President of Group Barceló, to the Chairman of the Board of Directors of NH, Alfredo Fernández Agras, in which he proposes considering the merger of the two companies. According to the initial proposal, the Mallorca-based firm would end up owning 60% of the merged group. Barceló explains that his interest in this merger stems from “the great strategic sense and the exceptional potential for the creation of value for the shareholders of both companies”.

The letter also opens the door for the merged group’s corporate headquarters to be located in Madrid and it proposes that the maximum governing body of the merged company, in which Grupo Barceló would hold a majority stake, would have sufficient members to ensure that the existing shareholders of NH are represented.

Barceló proposes a merger, in other words, “the integration of Grupo Barceló and NH through the delivery of new shares issued by NH to Grupo Barceló, keeping the company listed”. “Our intention is to integrate all of the assets and liabilities of Grupo Barceló, including our Hotel and Travel divisions, which we believe could contribute value to the combined group. Nevertheless, we are willing to consider different alternatives regarding the perimeter of the assets and liabilities in order to facilitate the success of the transaction”, said Barceló.

Three months to reach an agreement

The offer, which is non-binding and conditional upon a due diligence (detailed analysis) provides for a period of “up to 3 months for the completion of this work, to reach an agreement between the two parties and submit a transaction to our respective governing bodies for definitive approval”. In fact, Barceló said that he is willing to consider alternatives with respect to the perimeter of the operation to facilitate it.

If the proposal ends up going ahead, it would result in the creation of the largest Spanish hotel group, ahead of Meliá, which at the end of 2016, had 375 hotels and 96,369 rooms. It would become one of the largest players in the sector in Europe, behind only the British firm InterContintental and the French company Accor.

Barceló has engaged Santander as financial advisor for the operation and has not hired any legal advisor.

NH views the offer with suspicion

From the get-go, the offer has been viewed with suspicion by NH, which indicated to the CNMV that it had received “an unsolicited, preliminary and non-binding expression of interest” from Barceló for the merger of the two businesses.

According to this offer, Barceló would have “a majority on the administrative board”. Moreover, NH reminded the regulator that its Board of Directors recently approved a 3-year strategic plan “involving an independent project for significant growth, which is still valid today”.

NH’s largest shareholder is the Chinese giant HNA, which holds a 29.5% stake, but it is not represented on the Board of Directors following its expulsion last year due to a conflict of interest. After HNA is the British fund Oceanwood, with a 12% stake; and Hesperia, the chain chaired by José Antonio Castro, with a 9% stake.

Analysts think the merger makes “strategic sense” 

Analysts at Renta 4 and Bankinter agree with Barceló that the operation makes “strategic sense”.

Original story: Expansión (by Rebeca Arroyo and M. L. Verbo)

Translation: Carmel Drake

Socimi Bay Hotels & Resort’s Profits Rose By 87% In H1 To €102M

31 October 2017 – Alimarket

Bay Hotels & Resorts, the hotel Socimi created by Hispania and Grupo Barceló, has presented its results for the first half of 2017, which reveal that the Socimi increased its profits by 87% during the period to €102 million, with respect to June 2016. In turn, its revenues from the rental of hotels and shopping centres rose by 26.5% to €38 million. On the investment side, Bay spent €18.8 million to improve and reposition its portfolio during the first six months of 2017. The bulk of that investment was spent on the renovation of the Balearic hotel ‘Barceló Paradise Portinatx’ – acquired by Hispania for €11 million this year – and the Canary Island hotels ‘Barceló Teguise’ and ‘Occidental Jandía Mar’, amounting to €7.6 million, €3.6 million and €775,000, respectively.

Bay’s recent operations include the purchase of all of the shares in Armadores de Puerto Rico for €6.2 million on 28 June 2017. That entity owns land in Lanzarote, on which Bay plans to construct a luxury hotel with 225 rooms. Its plots are located adjacent to the ‘Occidental Lanzarote Playa’ (372 rooms) and ‘Occidental Lanzarote Mar’ (436 rooms) complexes, which Bay Hotels also owns. The objective of the Socimi is to create a luxury mega-complex in this tourist area, with 1,033 rooms in total. That same month, the Socimi also completed its purchase of the Balearic hotel ‘Fergus Tobago’ in Palmanova (Mallorca) for €20.5 million, and the Benidorm hotel ‘Selomar’ for €16 million. Looking ahead to future investments, the group held real estate investment commitments amounting to €19.4 million as at 30 June 2017.

Meanwhile, on 1 June 2017, Bay signed a liquidity contract with the entity GVC Gaesco Beka, S.V., with the aim of favouring the liquidity of its transactions and the uniformity of its share price. Overall, the Socimi held 406,450 own shares as at 30 June 2017, with a total value amounting to €2.15 million. At the end of the first half of the year, Hispania recorded a gross asset value of €931 million, which resulted in the recognition of a €73 million gain for asset appreciation in the income statement (…).

Following the various corporate operations, Hispania and Grupo Barcelona own 76% and 24% of the Socimi, respectively. The representative shares in Bay Hotels & Leisure Socimi have been trading on the Alternative Investment Market since 24 July 2017.

Original story: Alimarket

Translation: Carmel Drake

Hispania Buys 2 Plots In Canary Islands For €13M

31 July 2017 – Idealista

Hispania is pushing ahead with its strategic plan and, to this end, has completed the purchase of two plots of land on which it will build 2 luxury resorts. The plots of land acquired by the Socimi for €13 million are located in the Canary Islands, specifically, in Lanzarote and Fuerteventura.

In addition to hotel resorts, the objective of the investment vehicle, in which the magnate George Soros holds a stake, is to incorporate retail, leisure and sports facilities into the complexes. The project looks set to involve a total investment of around €50 million in the case of Lanzarote alone.

Hispania already owns the Occidental Playa and Barceló Lanzarote hotels, and based on the plans that it has in mind, the five-star complex would contain more than 1,000 rooms, which would make it the largest establishment in Hispania’s portfolio. In Fuerteventura, the Socimi also owns several properties, including two hotels that it purchased in the summer of 2015 for just over €100 million.

Over the last week, Hispania has been in the news for several reasons. Firstly, it is negotiating the sale of 24 office buildings for around €500 million; the insurer Swiss Life is the final candidate in that process.

In addition, the Socimi saw the stock market debut of the investment vehicle that it shares with Grupo Barceló (known as Bay Hotels & Leisure), which started trading on 20 July with a market value of almost €500 million.

Original story: Idealista

Translation: Carmel Drake

Grupo Barceló’s Profits Rose By 25% To €125M In 2016

28 April 2017 – Expansión

Grupo Barceló earned €125 million in 2016, which represented an increase of 25% compared to the previous year. Moreover, the hotel group expects to record a net profit of €150 million this year thanks to improvements in management and investments undertaken. The company obtained a gross operating profit (EBITDA) of €338.6 million in 2016, up by 12% and spent more than €140 million improving its hotel stock, of which €110 million was invested in a dozen establishments in Latin America, according to its annual report.

Grupo Barceló closed 2016 with turnover of €2,855 million, up by 15.1%, and net sales of €1,979.7 million (+23.7%), having managed to reduce its net financial debt by 8.3% to €495 million. At the next General Shareholders’ Meeting, which will be held on 2 June, the Board of Directors will propose the distribution of a dividend amounting to €12.5 million. Last July, the firm distributed a dividend amounting to €10 million, which was charged against the results for 2015.

Forecasts

Looking ahead to this year, the company expects to generate EBITDA of almost €388 million. “This year, we expect to see improvements in all of the countries in which we have a presence. The data for the first few months of 2017 show an improving trend in terms of occupancy rates, tariffs and RevPar (average revenue per available room).

Moreover, Barceló underlined that the soundness of its balance sheet will allow it to have access to “interesting” investment projects and to continue growing across all of its divisions. The company currently has 229 hotels in 21 countries, with almost 50,500 rooms, including 112 hotels from the US manager Crestline, which it consolidates 100% after purchasing the 60% stake that it did not control from AR Global in April last year. Overall, the group owns 39 of its hotels, leases 57 of them and manages the remaining 133.

In addition, the firm stated that in January, the Mercantile Court of Palma dismissed the claim against Barceló filed by the bankruptcy administration of Orizonia, which amounted to €59.6 million. In a letter, the Co-Presidents, Simón Barceló Tous and Simón Pedro Barceló highlighted the “record” results obtained both in terms of EBITDA and net profit, with double-digit growth in both parameters as well as in turnover, all as a result of its ordinary activity.

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake

Hispania Recorded A Profit Of €11M In H1 2015

31 July 2015 – El Economista

Hispania, the socimi controlled by the fund manager Azora Hispania Activos Inmobiliarios obtained a profit of €10.7 million during the first half of the year, which represented a 29-fold increase compared with the same period in 2014 (€0.4 million).

In H1 2015, Hispania, which began operations in March 2014 following its IPO, recorded turnover of €13 million, whereby multiplying its revenues in H1 2014 (€0.6 million) by 22, according to information submitted to Spain’s National Securities Market Commission (CNMV) yesterday.

Since its debut on the stock market, Hispania has invested in 32 assets, which have a consolidated gross value of €710 million.

During the second quarter of 2015 alone, the socimi acquired four assets – two hotels and two offices – and signed an agreement with Grupo Barceló to create the first hotel socimi.

During the first half of the year, Hispania also obtained additional financing of €70.1 million, taking its financial debt to €195.2 million.

Original story: El Economista

Translation: Carmel Drake