2nd UPDATE: Home Inns Close To Buying China's Motel 168 Chain - Sources
May 26 2011 - 6:40AM
Dow Jones News
Nasdaq-listed Home Inns & Hotels Management Inc. (HMIN) is
close to buying the company that owns China's Motel 168 chain from
Morgan Stanley (MS) and other shareholders for about US$500 million
in a cash and stock deal that will fetch around half what the
owners originally sought, according to three people familiar with
the transaction.
Morgan Stanley will be selling its 59% stake in Shanghai Motel
Management Co. to Home Inns, China's biggest budget hotelier, while
the other shareholders in Shanghai Motel will be exchanging their
stakes for shares in the combined entity, one of the people said.
He said Home Inns will be paying for the Morgan Stanley stake from
a US$300 million loan it is raising at the moment, as well as its
own cash. As of March 31, 2011, Home Inns had cash and cash
equivalents of CNY2.29 billion.
Talks have been exclusive between Home Inns and Shanghai Motel
for several weeks and the parties are now in advanced discussions
about terms, another person said.
Shanghai Motel is the fifth-largest budget hotel chain in China
by number of rooms, according to analysts, and buying it would help
market leader Home Inns further expand its pole position. Home
Inns, the largest budget chain operator in China by number of
rooms, had gone head to head against China Lodging Group Ltd.
(HTHT), the fourth largest budget hotelier, for the stake in
Shanghai Motel.
Morgan Stanley controls 59% of Shanghai Motel Management Co.
through one of the investment bank's real estate funds. It, as well
as the other two shareholders of Shanghai Motel, had put the
company up for sale in February, expecting it to fetch up to US$1
billion as foreign and domestic hoteliers scramble to buy into the
country's travel boom.
But worries that Shanghai visitor traffic will fall from last
year, when the city hosted the Shanghai Expo, and the opening of a
record number of new hotels in China last year, have hurt Chinese
budget hotel shares this year.
So far this year, shares of U.S.-listed Home Inns are down 11%;
China Lodging is down 12%; 7 Days Group Holdings Ltd. (SVN),
China's second-biggest chain, is 11% lower; and Shanghai
International Jin Jiang Hotels Development, the third-biggest
economy-hotel operator in China, has fallen 16%.
Analysts said this was a good deal for Home Inns, despite
integration costs from a merger of the two sides.
"If Motel 168 is valued at US$500 million, that would put the
value per room at about US$11,400, which is about 2% less than Home
Inns' current Enterprise Value per room of $11,671, based on Home
Inns current stock price," said Noah Hudson, research analyst at
Guotai Junan (Hong Kong). "That's good for Home Inns because Motel
168 has about 37% of its hotels in Shanghai, where properties are
more valuable, compared to Home Inns, which has about 9% of its
hotels Shanghai."
Earlier this month, Home Inns posted a 42% drop in first quarter
net profit on higher hotel costs and operating expenses, while the
Chinese economy-hotel chain's adjusted earnings missed analysts'
expectations.
It reported a profit of CNY32.5 million ($5 million), or CNY0.06
(a U.S. penny) a share, down from CNY46.1 million, or CNY0.54 a
share, a year earlier. Excluding stock-based compensation and other
impacts, adjusted earnings fell to CNY0.39 (6 U.S. cents) from
CNY0.65. Analysts polled by Thomson Reuters expected a profit of 14
cents per American depositary share.
-By Nisha Gopalan, Dow Jones Newswires; 852-2832-2343;
nisha.gopalan@dowjones.com
Homeinns Hotel Group (NASDAQ:HMIN)
Historical Stock Chart
From Jun 2024 to Jul 2024
Homeinns Hotel Group (NASDAQ:HMIN)
Historical Stock Chart
From Jul 2023 to Jul 2024