Spain’s Competition Authority Approves Minor’s Takeover of NH

21 July 2018 – Expansión

Minor’s takeover of the NH Hotel Group is moving forward. The Spanish National Securities and Markets Commission (CNMV) admitted the offer from the Thai company Minor on Thursday and then, yesterday (Friday), Minor obtained approval from the Spanish and Portuguese competition authorities (CNMC). In this way, the offer is conditioned “exclusively” on its approval by Minor’s General Shareholders Meeting, which has been convened for 9 August. The Thai company currently controls 29.8% of NH’s share capital and, in September, plans to complete the purchase of an additional 8.4% stake from the Chinese firm HNA, which will increase its percentage stake to more than 38%.

The company, which is offering to pay €6.40 per share (€6.30 following the payment of the dividend approved by the General Shareholders’ Meeting) has indicated that its objective involves controlling between 51% and 55% of the Spanish group and for the remaining shares to continue to be listed. If that limit is exceeded, the company will consider making way for the entry of a financial partner in the share capital. Minor has also said that its objective involves increasing NH’s dividend by 50% next year to €0.15 per share.

The Thai group recorded revenues of €1.4 billion in 2017, has a market capitalisation of €3.9 billion and employs 66,000 people. With this operation, Minor will strengthen its hotel presence in America and Europe. Minor has 161 hotels and 20,384 rooms, primarily in Asia and Africa, whilst NH has 382 establishments and 59,350 rooms. Currently, the only markets in which the two chains have a presence are Brazil, Portugal and the United Kingdom.

At the General Shareholders’ Meeting held in June, the Chairman of NH’s Board, Alfredo Fernández Agras, described the offer as insufficient. Moreover, the President of Hesperia and CEO of NH, José Antonio Castro, expressed his criticism of the operation and his dissatisfaction with the Thai group’s entry onto the Board of Directors, where it now has three representatives.

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake

Deloitte: 173 New Hotels will Open in Spain Between Now and 2021

9 June 2018 – Expansión

The tourist boom and interest in the real estate sector have boosted the hotel segment. So far this year, operations amounting to €2.4 billion have been closed and an acceleration is forecast for the coming months.

Spanish hotels are standing out as one of the most sought-after assets for investors in the real estate market. The tourism boom in Spain, which recorded its fifth consecutive record year in 2017 with the arrival of 82 million international visitors, coupled with the property boom, caused hotel investment to reach maximums in 2017 of almost €3.1 billion. Moreover, the commitment from investors to these assets will allow that figure to double this year.

According to data from the Hotel Property Handbook, compiled by Deloitte, to which Expansión has had access, €3.1 billion was transacted in the segment last year, which represents an increase of 44% YoY and accounts for 22% of all the investment activity undertaken in Europe, placing Spain at the head of the investment ranking behind only the United Kingdom, which accounted for 29%.

During the first five months of this year, more than €2.4 billion has been invested, which will be added to operations currently under negotiation amounting to around €4.2 billion, which are expected to close over the coming months, according to the study.

“So far this year, we have transacted an investment volume almost as high as that signed during the whole of last year. The private equity funds are proving to be the main stars of the activity, which may even double the figure recorded in 2017”, said Javier García-Mateo, Partner at Deloitte Financial Advisory.

Loans

That is in addition to the strong appetite from traditional Spanish credit institutions to finance hotel properties, due to the momentum of the sector. Their financing spans projects under development, including remodellings, repositionings and developments. In this sense, the most active banks in terms of senior lines of credit for these assets are CaixaBank, Santander and Sabadell.

Investors are betting on mega-operations and the creation of large portfolios, which will allow them to have a diversified business and gain bargaining power over tour operators.

This trend comes in addition to the interest from Asian players in hoisting their flags in Spain. For example, the emergence of the Thai group Minor in NH Hotel Group, which has reached an agreement to purchase HNA’s stake in the Spanish hotel chain and is studying a takeover bid for 100% of the company.

In this context, the large hotel groups have taken advantage of the boom years to invest in improvements in their asset portfolios although there is still a long way to go. The opening and renovation of hotels consolidated itself in 2017, with activity involving 74 hotels and 12,500 rooms, reaching cruising speed following a significant recovery in 2015 and 2016, with projects in 120 hotels and almost 17,300 rooms.

Over the next five years, investment in work to adapt the hotel stock is expected to amount to €2.2 billion.

According to the report, 65% of the hotel stock in Spain is obsolete, with an average age of more than nine years, which makes investment in capex the main priority if operators are to handle the competitive pressures and achieve better margins.

“The strong growth in tourism in Spain contrasts with average rates that are still excessively low in the holiday segment. The renovation of obsolete projects, combined with the arrival of international operators, will allow the repositioning of an offer that ought to compete on quality rather than quantity”, explains Viviana Otero, from Deloitte Financial Advisory.

By region, the Canarian archipelago, Andalucía and the Balearic Islands are the regions that require the greatest capex spending, accounting for almost 68% of the total.

This effort has contributed to an improvement in the main performance ratios of hotels. According to Deloitte, revenues per available room (RevPAR), one of the main profitability indicators, grew by 10% last year.

New openings

The strong performance of the sector also accounts for the new promotions and project renovations underway. Over the next four years, 173 hotels are expected to be opened in Spain containing almost 30,000 rooms. “53% of those will be new projects and 47% will be renovations. It is worth highlighting the importance that rebranding is gaining as a defensive strategy against the alternative destinations of Greece, Turkey and Croatia, said Patricia Plana from Deloitte Financial Advisory.

In terms of challenges facing the sector, the report highlights the saturation of certain destinations in the summer and the problems of co-existence alongside local residents in those regions, as well as the recovery of competitor countries in Southern Europe and the rise of holiday rentals boosted by collaborative economy platforms such as Airbnb.

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake

Idealista: Hotel Inv’t to Reach Record Figure of €3.2bn in 2017

26 December 2017 – Idealista

The year-end forecasts for hotel investment are marking record highs, exceeding the €3.2 billion threshold. This represents an increase of 45% with respect to 2016 and of 25% with respect to 2015, the record year to date when investment amounted to €2.55 billion. The large operations completed during the year include the 14 assets (HI Partners) that Sabadell sold to Blackstone for €630 million and the purchase of the iconic Edificio España building (pictured below) in Madrid by the hotel chain Riu for €380 million.

The hotel segment has risen to prominence in 2017 in terms of real estate investment, accounting for 30% of the total market share, exceeded only by retail. During the first six months of the year, €1.655 billion was invested in hotel purchases.

Madrid and Barcelona are the two cities that recorded the majority of the real estate operations: the Spanish capital accounted for 19% of total investment and the Catalan capital 12%. Nevertheless, markets such as Valencia, Sevilla and Bilbao also started to spark interest amongst investors. Meanwhile, in terms of holiday markets, the Canary Islands, Andalucía and the Balearic Islands led the investment ranking, accounting for 23%, 13% and 9%, of the total investment, respectively.

Between January and November 2017, 94 operations were closed, with 109 hotels changing hands. The most significant operation was completed by Blackstone, with its purchase of the HI Partners portfolio from Sabadell (…).

Another important deal was closed in June with the sale of a portfolio of 3- and 4-star Meliá Hotels, located in Ibiza, Lanzarote, the Balearic Islands and Torremolinos to London & Regional for €230 million.

In 2018, the investment figures in the hotel sector could soar once again if Barceló’s plan goes ahead to take over the NH Hotel Group, worth €2.48 billion. That deal would create a new market leader with more than 600 hotels and 109,000 rooms.

Original story: Idealista 

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

NH’s Shareholders Will Analyse Removal Of HNA’s Directors

26 May 2016 – Expansión

Oceanwood Capital, the fund that owns a 10% stake in the NH Hotel Group, has submitted a letter to the hotel company requesting that it adds some new items to the agenda for the General Shareholders’ Meeting, to be held on 21 June. It is requesting the removal of the four directors appointed by HNA, the Chinese company that owns a 29.5% stake in NH, i.e. the group’s majority shareholder.

Oceanwood believes that there is a clear conflict of interest that prevents those directors from defending the rights of all of the shareholders, rather than just those of the investment group that they represent. At the same time, Oceanwood has proposed the appointment of four external directors, because they cannot be classified as independent given that they have not been proposed by the appointments committee.

The document, which was submitted by due legal process yesterday, the last day on which it was legally admissible, requests the removal from the Board of the current Co-Chairman of the company, Charles Mobus, as well as of Ling Zhang, Xianyi Mu and Haibo Bai. The justification for these removals lies in the conflict of interst that now exists due to the structural and permanent competition between NH and its shareholder HNA, after the latter reached an agreement with Carlson Rezidor, a hotel group that competes directly with NH in Germany, the Netherlands and Benelux – particularly in Berlin, Brussels and Amsterdam – . Oceanwood asks not only that the General Shareholders’ Meeting removes these directors, but also that HNA is prevented from exercising its right to proportional representation as a result of its shareholding, until the aforementioned conflict of interest is eliminated.

In its request for the removal of the directors, Oceanwood emphasises, amongst other things, that the Chairman advised HNA on its purchase of Carlson Rezidor and that during that process, the possibility was proposed of the Chinese group submitting a takeover bid for 100% of NH. Moreover, it indicates that the three Chinese directors rarely attend board meetings in person, and instead choose to channel their votes through Mobus.

Support

In parallel to these removals, the fund, which hopes to have the support of other institutional investors to reach the 40% threshold, proposes the appointment of four new directors: Paul Johnson, Fernando Lacadena, María Grecna and José María Cantero de Montes-Jovellar. All are reputable professionals in their respective areas of activity. Johnson has worked in the hotel sector for 30 years, where he has created a chain, Kew Green Hotels, which has more than 5,000 beds and was recently sold to HK CTS for GBP 400 million.

Lacadena currently serves as the CEO of Testa – which has now been integrated into the Socimi Merlin – and, for several years before that, was the Finance Director at Sacyr. Meanwhile, Grecna has been the CEO of Värde Partners Europe and, between 2011 and 2013, was the CEO of the company in Iberia, headquartered in Madrid.

Finally, Cantero is a marketing specialist, who used to work at Amena (Orange) and who has worked for Mutua Madrileña for the last eight years, where he has served as the Deputy CEO. Oceanwood currently has one director on NH’s Board, Alfredo Fernandez Agras, and it asks that the General Shareholders’ Meeting ratifies his appointment. It says that there is no need to re-elect him, as it wants to prevent HNA from requesting the revocation of his appointment on the day of the General Shareholders’ Meeting.

Original story: Expansión (by S. Arancibia)

Translation: Carmel Drake

NH Replaces Meliá As Operator Of Hotel Suecia In Madrid

22 January 2016 – Expansión

The NH Hotel Group is strengthening its presence in Madrid. The chain will replace Meliá as the operator of Hotel Suecia after the property was purchased by the fund Internos Global Investors for €45 million. The consultancy firm JLL has served as advisor to the operation. The hotel will close this summer and will reopen in September as the 5-star NH Collection Cibeles – it is currently a 4-star hotel. NH, which will operate the property under a lease arrangement, now has more than 30 hotels in Madrid and may grow its portfolio further, albeit selectively.

Over the next four years, NH plans to open 19 hotels in 13 countries. In 2016, it will open properties in Spain, Italy and Mexico, amongst others. NH will also continue refurbishing hotels with a focus on the NH Collection, its premium brand.

Revenues in Spain, Portugal and Andorra rose by 8.9% during the 9 months to September and accounted for 23% of the group’s total income.

Original story: Expansión (Y.Blanco)

Translation: Carmel Drake

NH Cuts Its Losses By 59% To €17.9M In H1 2015

29 July 2015 – El Economista

The NH Hotel Group cut its losses by 59.2% during the first half of 2015 with respect to the same period in 2014, to €17.4 million, after recording positive results in the second quarter, according to its report to Spain’s National Securities Market Commission (CNMV) yesterday.

The hotel chain highlighted that its strong performance last year accelerated further during the second quarter, to generate a net profit of €11.8 million, compared with losses of €4.2 million one year ago.

These positive figures were achieved thanks to an improvement in the volume of activity and the initial results of the initiatives launched as part of the group’s five-year strategic plan. Since launching the plan, the group has completed the renovation of 27 hotels.

This situation allowed NH to generate income of €665.3 million in Q2, i.e. 8.3% more than in Q2 2014, including the sales of Grupo Royal, whose results have been consolidated with NH’s since 4 March 2015 (€643.9 million excluding them).

The company highlights the strong performance of its turnover in Spain and Italy, with increases of 7.6% and 10.3%, respectively, during the first half of the year. Similarly, it has retained control over its costs, which have grown by much less than revenues. As such EBITDA increased by 25.2% to €57.2 million, whilst recurring profits rose by 36.7% to €62.5 million (€60.3 million excluding Hoteles Royal). (…).

The company’s net consolidated debt amounted to €814.9 million at 30 June…having increased by €40.5 million with respect to the end of Q1. This increase is due mainly to investments in the repositioning and maintenance of its hotels, and a payment to the minority shareholders of Hoteles Royal.

Echenique’s departure

In addition to these results, the NH Hotel Group also announced that its non-executive President, Rodrigo Echenique, will step down within the next few months to focus on his new role at Banco Santander where he was appointed Chairmain for Spain on 30 June, and also serves as the entity’s fourth Vice-President. The change will take place once NH has found the right person to take over from him. (…).

Echenique’s departure comes despite the fact that his continuation in office was ratified very recently, specifically after the entity led by Ana Botín sold its stake in the hotel chain on 20 May. Echenique has served as the President of NH since November 2012, when he took over from Mariano Pérez Claver.

Original story: El Economista

Translation: Carmel Drake

NH’s Minority Shareholders May Ask To Join The Board

29 May 2015 – Expansión

29 June / The agenda for NH’s shareholders’ meeting does not currently include the appointment of any new directors. UBS now holds a 4.36% stake.

In the interests of progress in terms of corporate governance and to increase transparency, many listed companies, including the NH Hotel Group, are adapting their corporate bylaws to the new Capital Company Act. Thus, NH will include a item on the agenda of its shareholders’ meeting, which will be held on 29 June, about the reasonable balance of its board of directors, whose composition should reflect the relationship between the stable and free-floating capital.

In fact, the composition of NH’s board of directors has sparked unrest amongst the fund managers and minority shareholders due to the hotel group’s decision to not cover the two vacant positions left by Intesa Sanpaolo, when it sold its shares, by independent directors. Yesterday, their fears were confirmed. The agenda for the shareholders’ meeting includes the ratification of two directors – Francisco Román as an independent director and Ling Zhang as a representative of HNA, the majority shareholder of NH – and the renewal of two other directors – José María López-Elola, as an independent director and José Antonio Castro, as a representative of the Hesperia Group. There was no mention of any new appointments.

NH’s board comprises 11 people in total: four representatives of HNA – which holds a 29.5% stake -, two from Hesperia – with a 9.09% stake -, three independent directors, the CEO – Federico González Tejera – and the Chairman – Rodrigo Echenique-, who continues in the role despite the exit of Banco Santander, the shareholder that he previously represented.

Nevertheless, the composition of the board may change in the short term. The 8.56% stake held by Santander was distributed amongst three (fund) managers, which already held stakes in NH: BlackRock, Oceanwood and Henderson. The first two now hold more than 7.5%. The funds, which have shared their concerns about the reduction in (the size of) the board with NH, will request their own inclusion on the board of directors and their request may be discussed at the shareholders’ meeting. According to the bylaws, shareholders that represent at least 3% of the share capital have five days following the announcement of the shareholders’ meeting to request the inclusion of one or more items on the agenda.

Meanwhile, UBS now owns a 4.36% stake. On 21 May, the Swiss bank purchased 9.13 million shares from Santander for €46.57 million.

The Chairman

Rodrigo Echenique received €300,000 in 2014. This year, he will receive €200,000, i.e. 33% less.

The CEO

Federico González Tejera, the CEO, earned €1.62 million (in 2014), up 34%. His variable salary amounted to €788,000.

The other board members

In addition to Echenique and Tejera, the 16 people that held positions on the board in 2014 received €692,000 in total.

Original story: Expansión (by Yovanna Blanco)

Translation: Carmel Drake

NH’s Minority Shareholders Fear HNA Will Take Control

19 May 2015 – Expansión

Intesa’s exit from the share capital increases HNA and Hesperia’s control over NH – six of the hotel chain’s eleven directors are representives of the two largest stakeholders.

The funds and minority shareholders of the NH Hotel Group have expressed their concern following a decision by the Board of Directors not to appoint any more independent directors and therefore increase, albeit indirectly, the control exerted by the Chinese giant HNA and the Hesperia Investor Group – the two largest shareholders.

At the end of January, Intesa Sanpaolo put an end to its eight year investment in NH by selling its 7.6% stake. At the time, the Italian entity had just one director (Livio Giovanni Maria Torio) since its other representative (Rosalba Casiraghi) resigned in December 2014; her exit left NH without any female directors and granted HNA its fourth executive.

Following Intesa’s divestment, NH’s Board of Directors decreased from 13 to 11 members. And so it will remain for the time being. Last week, the management body approved the accounts for the first quarter. It also referred the appointment of Francisco Román and Ling Zhang (appointed by co-optation) and the re-election of José Antonio Castro and José María López-Elola (following the expiry of their mandates) for approval by the General Shareholders’ Meeting, which will be held in June. There was no mention of (the appointment of any) more independent directors, which has aroused concern amongst NH’s fund managers and minority shareholders, since the hotel chain’s corporate bylaws provide for a maximum of 20 directors and a minimum of five.

Over the last few years, funds such as THS, BlackRock, Fidelity and Invesco have all acquired shares in NH, although in most cases, their stakes, which fluctuate constantly, are currently trading at below 3%. Currently, four of the eleven directors represent HNA and Hesperia has two directors, even though it has reduced its stake by 8.56% to 9.09%.

Corporate governance

The counterweight are three independent directors, together with the CEO, Federico González and the Chairman, Rodrigo Echenique, who represents Santander and whose exit from NH is expected in the medium term. The concern of the minority shareholders is that, as well as violating corporate governance standards, HNA, which owns a 29.5% stake, will strengthen its hold over NH without launching a public takeover bid (OPA) for the company. If the CNMV establishes that NHA and Hesperia control NH between them, it may compel them to launch a takeover bid for 100% of the share capital.

Original story: Expansión (by Y. Blanco)

Translation: Carmel Drake

Santander Appoints Echenique To Lead Metrovacesa

7 May 2015 – Expansión

The Vice-President of the financial institution will take over the reins at the real estate company, after the bank increased its shareholding in the group, which has cut its debt in half in recent months.

A new President for a new era. That is the decision that has been taken by the four banks that own the real estate company Metrovacesa. Santander, BBVA, Sabadell, and Popular have decided to place the reins of the company in the hands of Rodrigo Echenique (pictured above), the Vice-President of the bank chaired by Ana Botín and President of the NH Hotel Group.

The appointment of Echenique as a non-executive director comes barely two weeks after the company held its annual shareholders’ meeting, which approved the appointment of four new directors, including Echenique. Abel Matutes and Juan Ignacio Ruiz de Alda also joined the management board, as representatives of Banco Santander, and Manuel Castro, from BBVA.

Rodrigo Echenique (Madrid, 1946) holds a degree in Law from the University of Complutense in Madrid and is a non-practising State Attorney. He has been CEO of Santander and is currently a member of the group’s board of directors and executive committees, as well as the Vice-President. Moreover, he is the President of the NH Hotel Group and a director of Inditex. He has also served as President of Vocento.

In his new role, Echenique replaces Ignacio Moreno, who will continue to perform executive duties as CEO, after less than three years as President. Meanwhile, Carlos García León, who served as CEO until now, will continue his duties as managing director.

Capital injection

The appointment of the new President comes just days after Metrovacesca’s shareholders approved the capitalisation of debt amounting to €751 million and five months after Santander acquired the 19% stake that Bankia owned in the real estate company.

Following the two operations, Santander has strengthened its position as the primary shareholder in Metrovacesa, which it first entered in 2011 along with five other entities; it currently owns 58.67% of the share capital. It is followed by BBVA with a 19.42% stake and Banco Sabadell, with 13.83%. In January, the three banks granted a loan to the real estate company amounting to €751 million to allow it to cancel tranche B of its syndicated loan early; in April this loan was capitalised. The other major shareholder, Banco Popular, did not participate in the transaction and holds 7.99% of the capital.

The capitalisation of this loan, together with the sale of its 26.9% stake in the French real estate company Gecina, has allowed Metrovacesa to significantly reduce its debt, down from a liability of €4,999 million in 2013 to net financial debt of €3,285 million at the end of 2014.

Original story: Expansión (by Rocío Ruiz)

Translation: Carmel Drake