InterContinental Hotels Group PLC (IHG) has announced that it has received a binding offer from Constellation Hotels Holding Limited (“Constellation”) to acquire InterContinental Paris – Le Grand (the “Hotel”). The proposed purchase price is €330 million ($442 million1), payable in cash at completion. Constellation has made a further commitment to invest over time an estimated €60 million in future hotel renovations. The terms of the offer are such that IHG would retain a 30 year management contract on the Hotel, with three 10 year extension rights at IHG’s discretion, giving an expected contract length of 60 years. Management fees are expected to be approximately €4m ($5m1) per annum.
The Hotel, which is located in the heart of Paris overlooking the Opera House, has 470 guest rooms, including 70 suites. It first opened in 1862 and has operated under the InterContinental brand since 1982. In 2013, the Hotel generated revenues of $118m and EBIT of $22m, and as at 30 June 2014, had a net book value of $342m. Cash taxes payable on the potential transaction are not expected to exceed $5m.
Following receipt of the offer, IHG has agreed to a period of exclusivity with Constellation, and, in line with applicable French legal requirements, IHG will enter into an information and consultation period with the relevant employees’ representatives.
A further announcement will be made in due course.
Richard Solomons, Chief Executive Officer of IHG commented:
“The InterContinental Paris – Le Grand is an exceptional property and is an iconic hotel in our portfolio. This announcement demonstrates the continued successful implementation of our asset-light strategy and the strength of our relationship with Constellation, following its recent purchase of InterContinental London Park Lane and its majority investment in InterContinental New York Barclay. This potential transaction is yet another example of the enduring appeal of InterContinental as one of the world’s leading luxury hotel brands.”
1 $ equivalents have been converted at current exchange rates with final $ amounts dependent on the exchange rate on the date of completion.