News for the Hospitality Executive
|By Jim Butler, Hotel Lawyer | Author of www.HotelLawBlog.com
February 15, 2007
Another milestone has been laid. The Board of Directors of Four Seasons Hotels Inc. — a public company — has formally accepted a $3.4 billion ($82 per share) purchase offer which surfaced on November 6, 2006 by a group of investors whose principals include Bill Gates, the Prince, and Isadore Sharpe, CEO of Four Seasons. It's a fascinating deal! But what does it really mean?
Now only shareholder approval, expected in April 2007, stands between the investors and their completed acquisition of Four Seasons Hotels Inc. of Toronto, Canada. Two thirds of the shareholders must approve the transaction. After three months of deliberations, the Board of Directors approved the buy out offer which will take the company private. The deal’s total value is $3.8 billion, including debt assumed. The purchase price represents a 28% premium to the closing price of Four Seasons shares on the day before the offer was announced last November.
The buyers, acting through investment vehicles, include Bill Gates, Chairman of Microsoft Corp., investing through Cascade Investment LLC, Saudi Prince Alwaleed Bin Talal Bin Abdulaziz Alsaud acting through Kingdom Hotels International of Saudi Arabia, and Four Seasons Chairman and CEO Isadore Sharpe and his family. Bill Gates and The Prince are two of the richest men in the world — both billionaires.
At the time the buyout proposal was first made public on November 6, 2006, The Prince owned a 23% stake in Four Seasons, and Bill Gates’ Cascade Investment owned a little over 8%. The Sharp family's Triples Holdings owned about 65% of the voting rights in Four Seasons through a multi-class stock structure established when The Prince made a major investment in the company about 15 years ago.
On consummation of the deal, Sharp will receive $289 million under a 1989 incentive plan. Sharp, age 75, and his family will retain at least a 10% interest in Four Seasons, and Sharp will remain chairman and CEO.
Four Seasons manages 74 luxury hotels in 31 countries and has 25 hotels under development. It was founded in 1978 by Isadore Sharp and his family.
Putting the Four Seasons deal in context of recent transactions
The acquisition of a luxury hotel chain by the world's richest man, Microsoft's Bill Gates, teaming with a Saudi prince in a transaction approaching $4 billion in value is interesting in itself. Prince Alwaleed has long shown a penchant for brands such as Citibank, Disney, and Fairmont. In fact, after rescuing Citibank in the banking and savings-and-loan disaster of the 1980s, some say the Prince rescued Four Seasons with his timely investment in the first round. In any event, his continued appetite for lodging investment has been demonstrated by his purchase of Fairmont in partnership with Colony Capital for an estimated $3.9 million (including debt assumption) in January 2006.
But the focus of billionaires and smart money on the lodging industry is nothing new. We have seen the likes of Ty Warner and Michael Dell acquire major luxury properties (a number of which have been Four Seasons hotels, by the way). And, at www.hotellawblog.com, we have talked about a number of other events or transactions that create a context that may be important to discerning the greater meaning of individual transactions such as the Four Seasons buyout. Some of these recent items include:
What does it all mean? Why is this significant? What conclusions can we draw?
When I look at the cumulative transactions described above, I don't see just ego gratification of rich celebrities. I see a common focus of a lot of very smart money on the lodging industry, and I draw these possible conclusions:
Brands. Brands are very valuable — particularly in the lodging industry. Brands are hard to establish and take a lot of time and money to develop, so there are big barriers to creating new brands.There are some interesting implications here to ponder. . . .
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|Also See:||Two Deals that May Change the Lodging World Forever / Jim Butler / January 2007|
|International Hotel Investments: Hotel Developers Should Keep their Eyes Wide Open; The Plays to Make Successful International Hotel Investments / Jim Butler / January 2007|
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