The sale of Scandic to Swedish private equity outfit EQT for Eu833m has been achieved at an impressive EBITDA multiple of 10 times.
While this figure is low compared to other recent portfolio transactions, particularly Travelodge, the nature of the leases in the Scandic portfolio meant the number is at the top end of expectations.
Scandic had been a millstone around Hilton International’s neck almost from the day it bought it back in 2001 for £620m. The fixed leases of much of the portfolio meant that profitability was hammered during the downturn.
Given the nature of the portfolio, the implied capitalisation rate (yield) on the deal of 6.5% looks full. And just as importantly for Hilton, it indicates that the company is on course to reduce its debt leverage from 4.4 times at the end of last year to 3.5 times by the end of this year.
The 132 hotels with more than 32,000 rooms are nearly all branded Scandic and nearly all leased. There are, however, three Hilton hotels and one other non-Scandic hotel.
Hilton said it would still have six hotels in the Nordic region, suggesting it expects to lose its brand on the three swapping hands.
EQT has drafted in Frank Fiskers from Hilton as the new CEO. Fiskers has been running Hilton’s London hotels since 2003 and was previously president for Sweden at Hilton, Scandic’s most important geographic area.
EQT partner Caspar Callerstrom said: “Scandic is the most efficient hotel chain in the Nordic region, at the same time as the Scandic brand enjoys a unique position on the Nordic market.”
Fiskers said: “EQT’s industrial focus, financial resources and tradition of investing in growth create sound opportunities to expand the business both organically and through acquisitions.”