EQT, which owns 78% of Scandic Hotels, is reported to have asked banks to pitch for a role in the IPO of the hotel operator.
The flotation of Scandic, the largely Nordic chain which has been bolstering its business with the acquisition of Rica and launch of a new brand, is potentially worth more than EUR1bn including debt, reports suggest.
EQT bought into Scandic in 2007, when it was spun off from Hilton, shortly before Blackstone took Hilton private. The sale was driven by Hilton International’s need to cut debt and need to divest itself of leases.
Of the 130 hotels in Scandic at the time, one was owned, six were franchised, three managed and the remainder leased. The estate remains skewed towards leases.
EQT acquired the group for EUR833m (an Ebitda multiple of 10 times) with the private equity group then selling a 17% stake to the Accent Equity 2003 investment fund shortly afterwards.
Rising stock markets in the Nordic region have encouraged several listings in recent months, including, from EQT the successful IPO of toilet and bath maker Sanitec in Stockholm in December.
While the company has so far failed to comment on the float, Scandic has nonetheless launched what could effectively be seen as a roadshow of its product. The launch of Scandic to Go gives guests a chance to rent a “mobile” hotel room for SEK2,500 (USD371) per night, which can be located anywhere in the Nordic region.
Looking not dissimilar in dimensions to a shipping crate, Scandic To Go consists of two mobile hotel rooms, both 18 sqm, with an attached terrace. The rooms are equipped with two 90 cm beds, a small seating area and all kinds of amenities such as TV, free wifi and air conditioning, as well as a fully equipped bathroom
“With Scandic To Go, we hope to create a curiosity and sense of what Scandic is today,” said Johan Michelson, VP brand & marketing at Scandic.
Scandic reported 2013 revenues of EUR913m, with Ebitda of EUR80m. Since the year end, it agreed to acquired Norwegian market leader Rica Hotels, adding 72 hotels to the portfolio, which now numbers 223. The deal bolstered Scandic’s position in Norway in particular and was the latest move by CEO Frank Fiskers to fulfill his remit of strengthening the company’s market position.
Fiskers re-joined the company in October last year as CEO, having previously held the position from 2007 to 2010, joining as EQT came on board. Fiskers joined the group first time around from Hilton, having been running Hilton’s London hotels since 2003 and previously being president for Sweden at the group.
In addition to expansion through acquisition, Fiskers and Scandic launched HTL at the end of last year, a brand the company described as a “City Compact Hotel” and which Fiskers called “a good opportunity for further growth in a partially new segment”.
The new brand will be separate from Scandic and operated as a sister company. Fiskers said at the time: “There are similar initiatives emerging internationally, but with HTL we are consolidating our position in the Nordic market. We are uniquely positioned to achieve the right contract models and we have the resources to create a strong concept and brand that complements Scandic.”
The target for HTL is 20 hotels within five years, with the first one opening in May 2014 in Stockholm with 275 rooms in a converted office building. Scandic said that the Nordic capitals needed more hotel capacity to continue attracting major international conferences, and the HTL properties would mostly be new construction or building conversions, particularly of office buildings. A second site is already secured in central Stockholm. In all, Scandic is looking to invest SKr500m (USD78m) in the new hotel chain.
HA Perspective [by Chris Bown]: EQT had better hope Swedish investors like the look of a slice of Scandic, whose shares will need to be priced carefully to ensure a good start. The Swedish market has responded positively to IPOs in the recent few months, and has yet to suffer the cold feet of other European stock markets. Don’t let them see what’s happening in London, where investors have fallen out of love with new issues. June saw several British IPOs falter, including EasyHotel, which only attracted half its target sum.
Scandic is a major player in Sweden and, with the acquisition of Rica, in Norway too. Yet with the launch of its new millennials brand HTL, it has demonstrated it thinks there is room for further domestic growth. While the proceeds of the share offer will be largely directed to return funds to EQT, an allocation to fund growth into other European markets – perhaps those with a strong outbound link from Sweden – might make sense.