Minor to major

Minor International described a “transformational year” in which its acquisition of NH Hotel Group paved the way, it said, for it to become a “truly global hospitality operator”.

The comments came as the company released its third-quarter results, which did not include NH, in which it said it would continue to pursue organic growth.

The company said: “Looking forward to 2019, in addition to the large expected contributions from NH Hotel Group, Mint’s organic hospitality business will also continue to aggressively pursue growth. Thailand is expected to see re-acceleration of Chinese tourist arrivals, while the strong momentum of its key overseas markets is expected to continue. In addition, the mixed-use and real estate business activities should continue to provide strong support for Minor Hotels’ business.”

Mint said: “For the remainder of 2018, Minor Hotels remains positive on the outlook of all business segments. The mixed-use business will grow, driven by strong residential sales pipeline, including the new luxury villas project, Avadina Hills by Anantara, which is next to Layan Residences by Anantara in Phuket.”

From the fourth-quarter onwards NH will be fully consolidated with Mint and its results will be reflected in Mint’s earnings.

For the third quarter, Minor Hotels reported net profit from existing operations up 32% on the year to THB891m (EUR23m), driven primarily by hotel operations, Oaks and residential sales. The group described strong performance “in all key overseas markets”, with revpar Minor Hotels’ owned hotels increasing by 13% against the same period last year.

At the end of the quarter, Mint owned 70 hotels and managed 94 hotels and serviced suites in 26 countries, giving it 20,660 hotel rooms and serviced suites under the company’s brands including Anantara, Avani, Oaks, Tivoli and Elewana Collection. The owned hotels portfolio accounted for 65% of hotel and mixed-use revenues during the quarter.

The end of October saw Mint complete its tender offer for shares in NH Hotel Group at a price of EUR6.30 per share. A total of 187,289,383 shares, representing 47.8% of its outstanding shares, were tendered in the offer and, together with Mint’s pre-offer shareholding, the group secured a 94.1% shareholding stake in NH, at a total investment amount of EUR2.3bn.

Mint described the acquisition of NH as “transformative” giving it a platform of 549 hotels across Asia, Australia, the Middle East, Africa, Europe, Latin America and the US. The group said that, with the tender offer completed, Mint would immediately turn its focus to working closely with NH “to complete integration-related tasks and to unlock value-accretive and mutually complementary benefits across both businesses, with the aim of maximising shareholder value in both companies on a foundation of financial discipline and strong corporate governance”.

In addition, over the next few quarters, Mint said that it would actively manage its funding structure, without new issuance of capital.

William Heinecke, founder & chairman, Mint, said: “The acquisition of NH Hotel Group has transformed Mint into a truly global hospitality company, with a strong focus on exceeding the expectations of today’s customers. The combined Mint-NH Hotel Group platform offers an extended product range across our combined brand portfolio with global geographical coverage. This, combined with the opportunities to leverage the respective strengths of Mint and NH Hotel Group to our mutual benefit, make it an extremely exciting time for our companies, our shareholders and our valued guests.”

In a filing on the Spanish bourse last month NH made it clear that, should the Thai-based company acquire more than 55%, it would consider different alternatives, including offering NH shares to strategic partners or maintaining a higher percentage with the issuance of perpetual bonds. A bank guarantee of EUR1.4bn was provided by Bangkok Bank Public Company, which would secure a total of 73.5% of NH.

Hotel Analyst understands that a buyer has been agreed for the balance of shares at NH.

As was reported last week in Hotel Analyst, Mint has also acquired a 10% stake in Global Hotel Alliance, taking a place on the group’s board. Chris Hartley, GHA’s CEO, told Hotel Analyst that that the deal had come about when founder members Kempinski and Omni invited others to join earlier this year, after some of the brands in the group, such as Minor, had grown to the extent that it was felt they should have more involvement at governance level, as well as having a chance to show their commitment to the alliance.

HotelAnalyst Perspective [by Katherine Doggrell]: Much has been written in these pages about what the latest change in ownership for NH Hotels Group would mean for the Spanish group – which has expressed that it’s not overly thrilled with the situation. The scenario isn’t finalised yet, of course, with Mint expected to cut its holding down to the 51% to 55% it originally intended when it first approached NH, but we understand that the balance will be picked up by a ‘friendly’ – at least to Mint – so now we await NH’s latest new strategy.

And now that Hyatt Hotels Corporation and Barcelo are unlikely to swoop in, it’s time for the reality of the Mint deal, which has already seen Hesperia stomp off to AM Resorts – and, we understand, throwing some spanners in NH’s own agreement with AM.

Huffing and puffing aside, Mint can bring that which hotel operators are currently seeking to compete with the likes of Airbnb and the alternative offerings hovering at the edge of the market. Mint first came to our attention in this European outpost when it took a stake in tip top restaurant group Corbin & King, bolting on some gleam to go with its existing food and beverage business. Given the parlous state of pretty much all hotel operators’ offerings in that area, a bit of expertise can’t hurt. Mint also has an apartment brands in the form of Oaks, not an offering which NH has looked at with enthusiasm so far, but as the leisure market becomes more aware of it, a pleasant-to-have. We await the new strategy.

Additional comment [by Andrew Sangster of HotelAnalyst]: Sometimes the headlines really do write themselves: Minor to major is just to easy to resist. But it is not entirely true. The combined group of Minor and NH is just the 19th biggest in the world on room count on Minor’s own figures (other rankings put the combined entity at 14th biggest in the world).

With just over 80,000 rooms, the new combo is a tenth the size of the true global majors like Marriott, Hilton, IHG and Accor. So this is not the same as Jin Jiang’s move on Radisson which puts the Chinese company into second or third place globally in room number terms.

But Minor should not be dismissed as a, erm, minor player. It has a huge domestic tourism business to build on: Thailand benefited from USD57.5bn of receipts from international tourists in 2017, putting it in fourth place globally. Spain was second placed with USD68.1bn of receipts [these figures are from the UNWTO’s World Tourism Barometer issued last month].

In many ways, Minor looks a lot like the UK conglomerate Forte. Minor’s founder and group CEO and chairman Bill Heinecke is, like Lord Forte, an immigrant who has become a hugely successful businessman in his adopted country.

Heinecke, an American by birth but now a Thai citizen, started what is now Minor back in 1978 after a stint in the advertising business. The sprawling business empire encompasses food and lifestyle divisions (the latter is mostly retail and fashion brands) alongside hotels. Prior to NH being consolidated, the other divisions represented just under half (47%) of Minor’s total revenues.

The company is listed on the Stock Exchange of Thailand and is no longer wholly owned by Heinecke who controls shares worth one-third of the company.

The move on NH was certainly audacious in that NH was bigger than Minor’s own hotel operations. But Minor had the necessary backing and, despite some market rumours, seems keen on more acquisitions. This week it has been linked to a USD350m move on India’s Leelaventure. Bill Heinecke was earlier reported as eyeing a number of deals and markets, including Japan and the US.

The market remains cautious on Minor’s expansionary ambitions, however, and its shares are down more than 20% since the start of this year taking its market cap down below USD5bn. Heinecke is probably right to pursue growth in the rapidly consolidating hotel market, even if some shareholders are getting jumpy. The trick is going to be avoiding the fate of Forte by growing quick enough to head-off activist investors spotting a break-up opportunity.

Posted on behalf of HotelAnalyst

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