ATLANTA, Feb. 20, 1998 - Bass PLC (Bass) (NYSE: BAS) today announces
that it has reached agreement with the Saison Group, owners of Inter-Continental,
to acquire the entire business of Inter-Continental, including its hotel
brands Inter-Continental and Forum and its hotel assets. The business will
be operated as part of Bass' hotel division, Holiday Hospitality Corporation.
The total consideration for the purchase of the whole of the issued share
capital of Saison Group, the holding company in relation to the Inter-Continental
will be 1.78 billion lbs ($2.9 billion). The consideration will be a $1.395 billion cash payment for the shares; the
repayment of debt of $450 million; and the assumption of debt net of cash which, at 31 December 1997, was $1.044 billion. The consideration will be reduced by the aggregate of interest unpaid in the business to 31 January 1998 together with interest from 1 February 1998 until completion, which is estimated to be $38 million at current
interest rates. The assumed debt will be partly refinanced after the completion of the acquisition.
Completion of the agreement, which is conditional on regulatory clearance
in Europe and the United States of
America, is expected by 31 March 1998. In addition, the parties have agreed in principle to draw up a master
license agreement for the Saison Group to operate the Inter-Continental and Forum brands for the whole of Japan.
Inter-Continental is one of the most geographically diversified of all
global hotel companies operating in more
countries than any other major upscale hotel chain. The business consists of 187 hotels, with 65,000 rooms, in 69
countries. The main brand is Inter-Continental (117 hotels), with some 44,000 rooms, which in Bass' view, is the
leading brand in the global upscale market. Inter-Continental has also developed a mid-scale brand, Forum, which
currently consists of 20 hotels. The remaining 50 hotels are Global Partner hotels -- independent hotels which
have a joint marketing agreement with Inter-Continental. There are a further 24 hotels in the pipeline which are
expected to join the system, the majority of which will be branded Inter- Continental. Inter-Continental owns or
has long leases on 22 of the 187 hotels.
The audited accounts for the year to December 1997 restated to UK GAAP,
taking account of Bass' accounting
policy and eliminating one-off items show that the business made an operating profit of $144 million.
Pro-forma earnings were $111 million on a debt free basis and the business generated $179 million of EBITDA
(Earnings before interest, tax, depreciation and amortisation) in the year. A value of $2.05 billion has been
attributed to the 22 owned hotels based on an independent valuation conducted for Bass by Richard Ellis
Holdings Ltd earlier this month. The balance of $0.8 billion reflects the consideration attributable to the joint
ventures, management contracts, franchise agreements and the brands.
Following completion of the transaction, Bass' interest cover will be
some five times on an annualized basis. The
transaction will be earnings enhancing in the first full financial year (1998/99).
In the first full year after acquisition, it is expected that annual
cost savings of $40 million will be achieved,
equivalent to approximately half of Inter-Continental's existing overhead cost, requiring one-off costs of
$50 million. The savings will come from greater efficiencies in reservations, purchasing, sales, marketing and
general overheads because of the scope of Holiday Hospitality's 2,400 plus worldwide hotel network.
Opportunities are also seen to enhance the productivity of sales and
marketing expenditures to generate more
revenue for the system. This alone is expected to improve revenue per available room in existing owned hotels by
some five percentage points over the next five years. This effort, combined with further benefits from applying
new management techniques to the owned hotel operations, should add at least three percentage points of gross
operating profit margin over the next five years.
Commenting on the purchase, Sir Ian Prosser, Chairman of Bass PLC, said:
"This is an excellent opportunity for
Bass and Holiday Hospitality. The purchase of the Inter-Continental brand, anchored by a number of unique
owned properties in key locations, is consistent with our strategy of growing Bass' business in markets which
offer long-term growth opportunities. The acquisition of Inter-Continental, which in our view is the leading global upscale hotel brand, provides excellent geographic complement to Holiday Hospitality's current structure and
gives us a broader portfolio of brands spanning the midscale and upscale markets around the globe."
Thomas R. Oliver, Chairman and Chief Executive of Holiday Hospitality,
commented: "We look forward to
building on Inter-Continental's existing strong base in Europe, the Middle East and Latin America. We also look
forward to expanding the brand in Asia and in the United States of America, in Holiday Hospitality's very strong
home base, where the brand is currently under- represented. There are substantial opportunities to improve the
performance of Inter-Continental by expanding the system, increasing RevPAR and reducing costs.
The international lodging market is attractive, with long-term growth
in the upscale segment being particularly
strong. Powerful brand names, such as Inter-Continental and Holiday Inn, and a wide geographic presence are
key success factors in this increasingly global market. The strong market presence acquired with
Inter-Continental will ensure that we build on our current success and gain access to further growth
Sir Ian Prosser concluded: "This acquisition, taken together with the
recent disposals, positions the Group as a
strong international competitor with a portfolio of leading brands in the faster growing global markets."
Holiday Hospitality(SM), the hotel business of Bass PLC of the United
Kingdom, operates or franchises more
than 2,400 hotels and 390,000 guest rooms in more than 60 countries and territories. The following service marks
are owned by Holiday Hospitality Corporation, its subsidiaries or affiliates: Holiday Inn(R), Crowne Plaza(R),
Holiday Inn Express(R), Holiday Inn Select(R), Holiday Inn Garden Court(SM), Holiday Inn SunSpree(R) Resorts,
Staybridge Suites by Holiday Inn(SM), Holidex(R), Holidome(R), Priority Club(R), Crowne Plaza Preferred(R) and
e.space(R). Holiday Hospitality offers information and reservations capability on its pages on the World Wide
Web of the Internet -- http://www.holiday-inn.com for Holiday Inn hotels and Holiday Inn Express hotels, and
http://www.crowneplaza.com for Crowne Plaza Hotels and Resorts. Information on our newest brand, Staybridge
Suites by Holiday Inn, is available at http://www.staybridge.com.
|Inter-Continental is one of only five global and truly upscale brands.|
|The Inter-Continental brand is anchored by a number of unique owned properties in key locations.|
|It gives Bass a broader portfolio of brands spanning the midscale and upscale markets around the globe and provides excellent geographic complementarity with Holiday Hospitality.|
|There are substantial cost savings and revenue growth opportunities from combining international networks.|
|The acquisition enables Bass to take advantage of a highly attractive
upscale hotel sector which is:
|Inter-Continental has a good balance of global exposure. It offers further upside in regions that are beginning to recover, whilst being comparatively protected in key gateway cities from any slow-down in countries that are currently enjoying strong economic performance.|
|Inter-Continental is sufficiently large to be a global brand, yet it is small enough to offer significant upside growth potential after acquisition.|
|All of the hotel brands will be well supported by the Holiday Hospitality infrastructure -- worldwide sales, reservations, IT and global offices -- and there will be substantial benefits from integrating Inter-Continental into the Group.|
|With a strong upscale brand in the Holiday Hospitality portfolio, the worldwide sales organization will have access to a greater number of premium alliances with airlines, intermediaries and corporate clients. This will enable Holiday Hospitality to generate more revenue centrally on behalf of all the brands in the system.|
|The acquisition of Inter-Continental will extend the network of relationships with hotel investors. This will clearly contribute to Bass' ability to grow the distribution of all the hotel brands around the globe.|
|With Inter-Continental, the active management of the asset base and the expansion of the brand will provide further opportunities to add to the future value of the Bass Group.|
|The Bass strategy will be to expand the brand aggressively, primarily through management contracts, but also through ownership, as the right investment opportunities arise. Over 100 target markets have already been identified in which to develop Inter-Continental and the necessary resources will be put behind the brand to drive its expansion. This could result in an investment of lbs250 million per annum on average, over the next three years.|
|Although upscale brands are growing faster than the sector at large, the industry is still very fragmented, with considerable scope for strong brands such as Inter-Continental to gain further share.|
|Bass estimates that "branded" upscale hotel revenues on a global basis have grown at nearly eight per cent per annum in the last ten years and this growth rate is expected to accelerate over the next decade.|
About Bass PLC
Bass PLC is a UK listed company, which has developed leading business positions in three major industries.