|SINGAPORE, April 23, 2001 - Raffles Holdings Limited (the “Company”
or “Raffles Holdings”) is pleased to announce that it has entered into
an agreement to acquire Swissotel Holding AG (“Swissotel”), which owns
and operates the Swissotel Hotels & Resorts froSAirRelations AG, a
division of the SAirGroup, for CHF410 million or S$439 million (subject
to certain adjustments).
The completion of the transaction is expected on 31 May 2001.
With this acquisition, the Company has more than doubled its rooms inventory,
strengthened its brand equity, diversified its geographic distribution
and greatly increased its earnings contribution from management contracts.
Raffles Holdings has also significantly enhanced its position as the leading
hotel chain headquartered in Asia Pacific with the most extensive reach
worldwide, across six continents and 17 countries.
The Company is buying Swissotel as a going concern via a cash acquisition
of its stock. The transaction follows a two-stage bid process with
a select number of potential acquirors chosen for potential strategic fit.
Raffles Holdings was chosen to negotiate exclusively in the second stage
based not only on competitive price but also on a range of non-price objectives
including the future of the Swissotel brand, intentions with respect to
personnel and the nature and extent of the ongoing relationship desired
with SAir Group.
Through this transaction, the Company gains ownership of the Swissotel
brand and its trademarks, and management contracts for 23 hotels, including
those of 6 majority or wholly-owned hotel properties and minority interests
in 3 hotels. Furthermore, by 31 December 2001, the Company has the
opportunity to progressively acquire the remaining third-party minority
interests in the US subsidiary that manages the North American Swissotel
The Company will assume debt totalling CHF122 million and fund the balance
of the acquisition with a multi-currency acquisition facility totaling
S$309 million. The Company intends in due course to repay these borrowings
with a portion of the proceeds of its previously announced divestment of
a 55% interest in its Raffles City property.
acquisition offers a compelling strategic fit on terms that are consistent
with our financial objectives. The transaction is accretive in the
first full year and the pricing is attractive compared to investment alternatives,
other comparable transactions, and our cost of capital. We have increased
our inventory of luxury and deluxe rooms by 139 per cent to 13,457 rooms.
Our global footprint has been enlarged to 39 hotels in 34 destinations
which are business capitals, cultural centers and major leisure destinations,”
said Mr. Richard Helfer, President and Chief Executive Officer, Raffles
Mr. Wolfgang Werle, President and Chief Executive Officer, SAirRelations,
said, “We could not have found a more perfect match than Raffles Holdings
as a new home for Swissotel. A major criterion in selecting Raffles
Holdings was its commitment to the growth of the Swissotel brand.
We are encouraged by Raffles Holdings’ reputation, experience in brand
development and management, and its highest standards of product and service.
As part of our commitment, we look forward to an on-going long-term relationship
between Raffles Holdings and SAirGroup, which will be beneficial to both
The acquisition of Swissotel achieves several Raffles Holdings strategic
Increased Global Reach—Swissotel further enhances the Company’s geographical
footprint with an extensive post acquisition room distribution, fulfilling
Raffles Holdings’ stated objective of managing 12,000 rooms by end 2003.
This acquisition complements Raffles Holdings’ portfolio in Europe and
provides a significant presence in key North American gateway cities, the
latter without additional asset exposure. Swissotel also provides
Raffles Holdings with strategic entry via established operating hotels
in North Asia, the Middle East and South America.
Middle East / Mediterranean
With this acquisition the turnover and revenue flows are substantially
diversified by region, providing greater financial stability.
Enhanced Brand Equity — Swissotel
has a strong brand recognition in Europe and the Americas and complements
Raffles Holdings’ Merchant Court hotels which are represented primarily
in Asia Pacific. Swissotel’s portfolio of deluxe hotels integrates
well within the Raffles International’s master brand architecture.
The Raffles brand of hotels and resorts caters to affluent leisure and
business travellers who require something beyond five star accommodations.
The 4 -- 4-1/2 star Swissotel and Merchant Court brands of hotels are aimed
at modern business travellers, with an emphasis on quality and comfort.
Following the acquisition, Raffles Holdings will rationalize the brandings
of Merchant Court and Swissotel under its master brand. This acquisition
strengthens Raffles International’s two-tiered brand architecture and provides
the scale and scope to reach and tap wider market segments.
Operating Benefits of Scale — This
acquisition will result in the following benefits arising from increased
Increased Focus on Management Contracts —
The acquisition of Swissotel will increase fee based income from S$18m
to S$48m based on 2000 proforma results, with the number of third party
management contracts increasing from 5 to 21. This is in line with
the Company’s strategic goal to become a pure hotel play with a bias towards
management contract income.
“network effect” on customer equity and loyalty of the increased number
of hotel locations
ability to spread IT, reservations and sales & marketing investments
over a broader base
improved purchasing power as a result of the acquisition and relationship
with SAirGroup resulting in lower procurement costs
management scalability in that the combined operating infrastructure will
enable the group to grow its management contract base by another 20 hotels
with limited additional overheads
improved ability to compete for management contracts and acquisitions
Enhancing Human Capital — Swissotel’s
key executives bring with them depth of experience, institutional knowledge,
and operational excellence, and will be integrated into the Company’s management
team. An integration team comprising senior management has been set
up to adopt the best practices of both organizations, and to identify and
retain core competencies. In the integration, the Company will actively
leverage on the proprietary training programmes and facilities of Raffles
International Training Centres worldwide.
In assessing potential acquisitions, the Company considers a variety
of financial criteria, including the impact on earnings, future earnings
growth, return on equity, yields available on competing investments and
its own cost of capital. By all these measures, the Company believes
that the transaction represents an attractive investment opportunity.
Barring unforseen circumstances, the Company expects the transaction to
be accretive to 2001 earnings before one-time integration costs of S$5.3
million and amortization of goodwill. It also expects the transaction
to be accretive to earnings in 2002.
The Company expects Swissotel to show attractive growth in turnover
and EBITDA due to Swissotel’s opening of three additional managed properties
currently under development, the continued strong operating conditions
in Swissotel’s markets and on-going capital investment programme.
In addition, the Company expects the transaction to improve its future
earnings growth prospects, due to its enhanced ability to compete for future
management contracts and acquisition opportunities. By putting increased
emphasis on revenues from management contracts, the transaction is consistent
with the Company’s objective of shifting towards a less capital-intensive
Assuming that no value is allocated to the management contracts, the
brand equity and other assets that the company has acquired, and all of
the purchase price is allocated to the majority and wholly-owned properties,
the resulting value per acquired room is S$319,000. The Company believes
this value compares favourably with recent hotel property acquisitions
of which it is aware. The Company also expects the transaction to
generate returns in excess of its financing costs and its estimate of its
long-term cost of capital.
The Company expects to realize recurring synergies at a “run-rate”
of up to S$15 million annually by year-end 2002. Specific areas of
cost savings or revenue enhancement include:
Morgan Stanley and Credit Suisse First Boston served as investment advisors
to Raffles Holdings Limited and Swissotel Hotels & Resorts respectively.
roll-out of Raffles service concepts including food and beverage, retail
revenue upside associated with the repositioning of Swissotel hotels
combined operational efficiencies including licence fee reductions, recruitment
and training, financial services and hotel management service recharges
closing of Swissotel New York head office
operational improvements in the form of standardized operating processes
ongoing benefits from the relationship with the SAirGroup
None of the Directors nor the substantial shareholders of the Company
have any interest, direct, or indirect, in the acquisition.
Raffles Holdings Portfolio (Post Acquisition)
The Raffles Holdings Group portfolio consists of 13,457 rooms
in 39 hotels in 34 destinations over 6 continents
Asia Pacific - 5,649 rooms and suites
|Raffles Hotel, Singapore
|Raffles City Hotels: currently Westin Stamford
|Raffles City Hotels:currently Westin Plaza
|Grand Hotel d’Angkor, Siem Reap, Cambodia
|Swissotel Beijing, China
|Swissotel Dalian, China
|Merchant Court Hotel, Sydney, Australia
|Merchant Court Hotel, Singapore
|Merchant Court Hotel at Le Concorde, Bangkok, Thailand
|Raffles Resort Bali at Jimbaran, Indonesia (end 2003*)
|Raffles Resort Bintan, Indonesia (end 2004)
|Merchant Court Hotel, Shanghai, China (end 2003)
The Americas - 2,862 rooms and suites
|Raffles L’Ermitage Beverly Hills, Los Angeles,
|Swissotel Atlanta, USA
|Swissotel Boston, USA
|Swissotel Chicago, USA
|Swissotel New York, The Drake, USA
|Swissotel Washington D.C., The Watergate, USA
|Swissotel Lima, Peru
|Swissotel Quito, Ecuador
Europe - 3,109 rooms and suites
|Hotel Vier Jahreszeiten, Hamburg, Germany
|Brown’s Hotel, London, England
|Le Montreux Palace, Montreux, Switzerland
|Swissotel Amsterdam, The Netherlands
|Swissotel Basel, Switzerland
|Swissotel Brussels, Belgium
|Swissotel Dusseldorf, Germany
|Swissotel Geneva, Metropole, Switzerland
|Swissotel London, The Howard, England
|Swissotel Zurich, Switzerland
|Raffles L’Ermitage Berlin, Germany (end 2002)
|Raffles Resort Mallorca at Colinas d’Es Trenc, Spain
|Swissotel Berlin, Germany (end 2001)
|Swissotel Frankfurt, Germany (end 2003*)
Middle East/ Mediterranean - 1,837 rooms
|Swissotel Cairo, Egypt
|Swissotel, Gocek, Turkey
|Swissotel Istanbul, The Bosphorus, Turkey
|Swissotel Sharm El Sheikh, Egypt (Fall 2001)
|About Swissotel Hotels & Resorts
Founded in 1980, Swissotel Hotels & Resorts’ portfolio
comprises 25 properties represented in major business, cultural and leisure
destinations around the world. The chain currently operates properties
in Atlanta, Boston, Chicago, New York, Washington D.C., Lima, Quito, Amsterdam,
Basel, Brussels, Dusseldorf, Geneva, London, Montreux, Zurich, Beijing,
Dalian, Cairo, and Istanbul, with 3 properties under development in Egypt,
Turkey and Germany.
Swissotel properties are noted for their consistent high
standards of quality in facilities and services. In all aspects the
hotels reflect the lengthy and unsurpassed traditions of the finest of
Swiss hospitality. Service is fine-tuned, efficient, gracious and
welcoming. Through innovative application of the latest in technology,
Swissotel properties meet and exceed the expectations of business travellers
as well as leisure guests. In June 2000, Swissotel was the first
international hotel company to have a worldwide rollout of Wireless Application
Protocol (WAP). In addition, the chain’s business rooms feature state-of-the-art
telecommunications systems that ensure all aspects of business can be conducted
without any loss of productivity while away from home or office.
Awards and Honours:
Best Practice Champions in the areas of Revenue Management
& Global Sales, American Hotel Foundation and Cornell University, 1999
Top Ten North American Hotel Chains, Business Travel Awards,
Conde Nast Traveler, May 2000
Upper Upscale Category, Top US Hotel Chain Survey, Business
Travel News, February 2000
Swissotel Dalian awarded 5 Stars of Excellence, the first
internationally managed hotel to receive this honour, PRC National Tourism
Award, May 2000
Bronze Travel Star 2000 award for exemplary service, Travel
Inside, January 2000
Swissotel Atlanta listed in “Work Room - Our Guide to the
7 Best US Hotels for Business Travelers”, American Way Magazine, January
Swissotel Istanbul listed in Gold List of “Best Places to
Stay in the World”, Conde Nast Traveler, 1999 & 2000
Le Montreux Palace listed in Gold List of “Best Places to
Stay in the World”, Conde Nast Traveler, 2001
|About Raffles Holdings Limited (Post Acquisition)
Raffles Holdings Limited is the leading hotel chain headquartered
in Asia Pacific having a portfolio with the most extensive reach worldwide,
across the six continents of Asia, Europe, North America, South America,
Australia and Africa. Raffles Holdings has a portfolio of 39 hotels
with 13,457 rooms in 34 destination cities. Raffles Holdings is a
subsidiary of CapitaLand Limited, which has an asset base of over S$18
billion. Both companies are listed on the Singapore Exchange.
Raffles International Limited, formed in 1989, is the
hotel management arm of Raffles Holdings. Raffles International is
a name well respected in the industry for its standards of quality, award
winning concepts and innovative approach towards hotel management.
Raffles International’s hotels and resorts are marketed
under a two-tiered brand structure. The “Raffles brand” distinguishes
themselves by the highest standards of products and services available
in major cities on an international level. The “Swissotel brand”
and “Merchant Court” hotels offer quality accommodation and the full range
of modern facilities and amenities expected by today’s discerning traveller,
with an emphasis on quality and comfort.
The Raffles International approach to each hotel is unique,
innovative and market-driven. Our commitment is to create and manage
hotels which by their style and quality, are immediately recognised as
hotels of preference.
Certain statements in this announcement constitute “forward-looking
statements”. These include, among others, statements relating to
our current expectations regarding our financial results, Swissotel’s financial
results and the anticipated synergies and revenue enhancements.