Sol Kerzner is to step down as chairman at Kerzner International Holdings, after the Investment Corporation of Dubai acquired a “significant” equity interest in the company from its founders.
Kerzner said that he wished the company well as it pursued its growth strategy which has seen it focus on expanding its brands as a management company after restructuring to cut its debt.
ICD joins fellow Dubai-based investor Istithmar World, a subsidiary of Dubai World, at Kerzner International. While the details of ICD’s stake were not revealed, it had been reported to be around 46%. Istithmar holds a 25% stake. The remaining shares are held by Goldman Sachs and Colony Capital.
Mohammed al-Shaibani, ICD CEO, said: “This investment reaffirms ICD’s commitment to support the long-term growth of our domestic hospitality market, a key pillar of and growth sector for the Dubai economy.” Al Shaibani will replace Kerzner as chairman, with Kerzner International CEO Alan Leibman remaining in his position.
Leibman said: “Kerzner is entering an exciting new chapter in our business. We are happy to have ICD as a major shareholder as they recognise the value driven by the world-class experiences and destinations delivered by the Kerzner brands.”
For ICD, the deal adds a hotel group to a portfolio which also includes Emirates Airline, Emaar and the Dubai Electricity and Water Authority. ICD’s assets were recently value at USD70bn by the Sovereign Wealth Fund Institute.
H.H. Sheikh Mohammed bin Rashid Al Maktoum, chairman, said: “The portfolio companies that currently reside under ICD are symbols of Dubai’s successes in achieving excellence in the sectors in which we have chosen to participate. These companies will be the engine of Dubai’s future growth under the stewardship of ICD’s board of directors.”
Kerzner, who founded the company in 1994, said: “This is a significant milestone in my life after a long and happy career in the tourism industry and I wish the company well. I am confident that with ICD’s guidance, the company will fulfill on its upcoming expansions towards further growth and global reach.”
Kerzner International manages the global Atlantis and One & Only resort chains; much of its business is now focused on Dubai, with three resorts in Dubai, two resorts in The Bahamas, and more in Mauritius, The Maldives, Mexico, Morocco, South Africa and soon, Australia and China.
At the end of last year the group signed an agreement to build a USD1.6bn resort on China’s Hainan Island, funded by Fosun International, the largest privately-owned conglomerate in China. The Atlantis resort will include 1,300 hotel rooms, 18 bars and restaurants, a water park, dolphin shows and marine exhibits. The resort is due to open in 2016.
As previously reported in Hotel Analyst, in March last year the company signed a USD145m loan refinancing agreement to help cut costs and extend its debt maturity profile to five years. The previous year saw Kerzner sell its 50% stake in Dubai Atlantis to Istithmar World, part of Dubai World, and hand over its Atlantis Bahamas resort to the site’s lender, Brookfield Asset Management. Both resorts remained under the company’s management, with the deal marking Kerzner International’s move away from ownership and into management and branding.
At the time of the Bahamas deal, Kerzner said: “With substantially less debt and a more flexible operating structure, Kerzner is well positioned for sustainable long-term growth as a global management company”. The deal with Fosun joins plans for One&Only Montenegro, the company’s first resort in Europe and One&Only Sanya in China, its first resort in Asia, indicating that it’s on its way to achieving its management goals.
Kerzner, who is now in his late 70s, may have described the sale and decision to step down as a “significant milestone” but, with a history of founding hotel chains – including Southern Sun – and building the infamous Sun City resort – it is not certain that he will be spending his days on his Gary Player-designed championship golf courses just yet.
HA Perspective [by Katherine Doggrell]: When Kerzner International made its signature move with the opening of Atlantis the Palm in Dubai in 2008 it is unlikely that the group’s chairman imagined that he would be leaving the whole company there. But the location which almost pulled it under has now emerged as the one which may rescue it.
The company must now continue without its emblematic leader, but with Liebman still in the CEO seat, a positive veteran in the role having been there since 2004 and, with a background at Ritz Carlton in roles including catering manager and GM. A hotels man through and through.
This bodes well for his longevity, with his new paymasters having experience on the investment side, less so the hotel side. ICD is looking for ‘symbols of Dubai’s success’, code if ever there was one for building up a portfolio of investments that it can show off about globally and good news for those fearful that it would look to cut costs in the luxury portfolio.
One wonders indeed why ICD has waited so long to get into the hotel sector, one of the great investment peacocks. Possibly it was delayed by the lack of available Dubai-based hotel groups to shout about (Jumeirah having taken the more sober route to growth).
The emirate is currently seeing rapid expansion as part of the Tourism Vision for 2020, announced in May last year, which calls for a doubling in the 10 million tourists received in 2012 to 20 million per year by 2020. Last year saw Dubai hotels welcome more than 11 million guests in 2013 – an increase of just over one million on the 2012 numbers as the emirate moves towards its target of 20 million visitors a year by 2020.
In Kerzner International ICD has found the iconic hotels with which to stand at the head of Dubai’s resurgence.