Taiwan-based Formosa International Hotels Corporation (FIH) has inked a joint venture agreement with InterContinental Hotels Group (IHG) to accelerate the international expansion of Regent Hotels & Resorts (Regent).
In a statement announcing the deal, IHG reveals that under this agreement it will take a 51% stake in Regent for US$39 million in cash. It also has the right to acquire the remaining 49% interest in a phased manner from 2026. The deal is expected to close during the second quarter of 2018.
Meanwhile in a separate statement, FIH says all current Regent properties will join IHG’s global online reservation system and loyalty programmes, accelerating the growth of both sales and profits. Also, IHG will have the rights to develop and manage all existing and new Regent hotels outside of Taiwan while FIH will retain exclusive rights to develop and manage future developments under the Regent brand in Taiwan, including the management of the Regent Taipei Hotel.
IHG will bring Regent into its brand portfolio at the top end of the luxury segment and will accelerate its growth globally. It plans to grow the Regent brand from the current six hotels (Singapore, Taipei, Beijing, Chongqing, Berlin, Montenegro) comprising 2,000 room to over 40 hotels in key global gateway city and resort locations.
Regent Porto Montenegro (Image credit: InterContinental Hotels Group)
IHG explains the acquisition of Regent is part of its new strategic initiatives to expand its footprint in the fast-growing US$60 billion luxury segment.
The hotel group also announces InterContinental Hong Kong will become a Regent Hotel in early 2021 after an extensive refurbishment due to start in early 2020. Originally built as The Regent Hong Kong in 1980, the hotel was rebranded to InterContinental Hong Kong in June 2001. The rebranding will make the hotel a flagship property for the Regent brand, returning the property back to its original roots.
“IHG is already one of the world leaders in luxury with our InterContinental Hotels and Resorts brand, but we see significant potential to further develop our global footprint in the fast-growing luxury segment. As one of the pioneers in defining luxury hotels both in Asia and around the world, Regent is an excellent addition to IHG’s portfolio of brands. We see a real opportunity to unlock Regent’s enormous potential and accelerate its growth globally,” comments Keith Barr, chief executive officer of IHG.
Adds Steven Pan, executive chairman of FIH: “Regent was founded by legendary hotelier Robert H. Burns, who sought to combine Asian hospitality and Western elegance to create a leading luxury hotel brand. The brand has an unrivalled heritage at the very top end of the luxury segment and the flagship Regent Hong Kong was consistently voted the world’s best hotel in the 1980’s and 1990’s. Returning the property to its original roots as a Regent hotel is symbolic of our ambition to return the brand to its former glory and will go down in history as one of the greatest brand comebacks in the hotel industry.”
Here are the transactions details
• IHG’s 51% interest will be acquired for US$39 million in cash, paid in three tranches of US$13 million, the first upon the date of completion, the second in 2021 and the third in 2024. These amounts will be funded within IHG’s existing capital expenditure guidance of up to US$350 million gross, and US$150 million net, per annum into the medium term.
• IHG has the option to acquire the remaining 49% stake in a phased manner from 2026. This will be via a combination of put and call options, is capped, and is based on a trailing twelve-month multiple of joint venture income, which based on our current projections would result in a payment of less than $100 million.
• IHG expects to grow the brand to more than 10,000 rooms (40 hotels) over the long term.
• The transaction is expected to close during the second quarter of 2018 upon satisfaction of certain customary conditions.
• There are currently 6 hotels (2.0k rooms) in the Regent system. The annual fee income of those management contracts acquired by IHG will be offset by costs associated with the JV.
• There are currently 3 hotels (0.9k rooms) in the Regent pipeline.
• IHG expects to grow the brand to more than 10,000 rooms (40 hotels) over the long term.
• The transaction is expected to close during the second quarter of 2018 upon satisfaction of certain customary conditions.
Featured image credit (Intercontinental London – The O2): InterContinental Hotels Group
