Spanish hotelier NH has agreed a share swap with its Italian joint venture partner, bank Intesa Sanpaolo, in a bid to tidy up its shareholdings and make its stock more tradable.
The deal with Intesa Sanpaolo will involve the issuing of 42 million new NH shares, which will be swapped with Intesa’s current holding of shares in NH Italia. As a result the NH parent company will now own 100% of its Italian operation; and Intesa becomes a significant minority shareholder in the NH group.
“Execution of this transaction will significantly bolster NH Hotel Group’s equity, while simultaneously reducing its leverage ratio measured in terms of gross debt to equity,” said he company. “The transaction will also make NH Hotel group’s shares more liquid in the secondary market medium term.”
As a result of the move, in which no money will change hands, Chinese investor HNA will now hold 21.2% of the group, with investor GIHSA 17.7%. Intesa’s group holding will be 16%, with 45.1% of the group’s shares in free float.
The tidying up of shareholdings is part of NH’s ongoing reshaping as it manages a judicious reduction in its substantial debts and a refocusing of its brands. Looking back, 2013 now appears to be a year in which its fortunes started turning. Chinese travel group HNA made a EUR234m equity investment early in the year, while a complex EUR700m refinancing replaced more expensive debt and provided a EUR200m float to invest in the portfolio of hotels, and in improving operational efficiency. A five year business plan was also ratified by the board, which will clarify and strengthen the group’s brands while promising disposals of hotels that do not fit the new structure.
The company’s most recent figures for 2013, announced in February, appeared to suggest that even the weak home Spanish market is turning around. Italy was one of the best performing European markets in 2013, with revpar up on occupancy levels improved by 3.1%. Ebitda was up 62.5% in Italy, thanks to a significant reduction in lease and operating expenses.
NH and Intesa Sanpaolo set up NH Italia in 2007, with NH holding 55.5% of the shares and Intesa 44.5%. The deal followed NH entering the Italian market in 2006, by acquiring the Jolly and Framon chains. Intesa Sanpaolo is a major Italian banking presence, and was itself the result of a 2007 merger of two smaller Italian banks; it holds stakes in a number of major Italian businesses. NH currently lists 50 hotels across Italy, while NH Italia has also been used as a vehicle to add group hotel interests in the US, Germany, Holland and Belgium.
The deal has been given board approval, but will be put before shareholders for ratification at an upcoming annual general meeting, along with a proposal from Intesa to appoint a new proprietary director.
HA Perspective [by Katherine Doggrell]: News of a tidying up at NH is always welcome and, as is reported elsewhere in Hotel Analyst this issue, timely, with the transactions market warming up as confidence in Spain grows.
NH has been proactive here in acting to strengthen itself, but there are some clouds yet on the horizon, clouds which it cannot protect itself against. Santander is reported to be looking to shed the EUR400m debt it has with Grupo Inversor Hesperia (GIHSA), attracted by the current increase in interest from the investment community in the country.
With GIHSA owning 17.7% of NH and its Hesperia hotels being run by NH, a sale to anyone who wasn’t interested in maintaining the status quo might cause some headaches at a company which thought it had put such things behind it.