Blackstone is reported to have rejected a USD2bn bid for its Center Parcs business as undervaluing the group.
The company is still thought to be heading to a sale or flotation in the new year, as the transactions market in Europe continues to be buoyant, despite concerns over the region’s economy.
Reports suggest that private equity firm BC Partners and the Canada Pension Fund will return with a higher bid. Blackstone is thought to have hired Rothschild last month to draw up list of strategic options for Center Parcs. Under consideration is thought to be a refinancing ahead of a disposal.
Blackstone acquired Center Parcs in 2006 for GBP1.1bn, taking it off AIM and investing in growth. The private equity group has been busy over the past year, making the most of what were exuberant public markets to get through IPOs for Hilton Worldwide, La Quinta and Extended Stay.
Center Parcs is continuing to expand, with the company thought to be discussing a resort in Ireland, having opened its fifth site in the UK, in Woburn Sands, this summer. CEO Martin Dalby told The Daily Telegraph: “Our focus had always been to get Woburn open and get everything settled and we are still in the process of bedding it into the core operation. But the Irish market appears very attractive. We have had some very preliminary discussions around Ireland so I think our attention may well turn to Ireland as we look forward to the future. We’ve had a chat with the tourist board and people like that to see how the land lies.”
The company’s most-recent results, for 2013/14, saw it record occupancy of 97.2% (excluding the Woburn Sands site), flat on the year, with revenue up 3.7% to GBP314.6m. Guest satisfaction, where guests ranked their stay as ‘excellent or good’, was 96%.
Dalby – currently the poster boy for Barclays’ latest print campaign – said that this year would see the brand “consolidate, enhance and continue the innovation”, with forecast capex of GBP40m, up from GBP39.6m last year. He has previously commented that Blackstone would be looking for one year of clear trading at the Woburn Sands site before selling, putting a disposal at June 2015.
The market for IPOs in the UK has been strong this year, giving hope for a public exit. In its results this week, broker Numis Securities said: “Whilst a degree of uncertainty has returned to the markets, we believe that an appetite for high quality IPOs will prevail along with increased activity in M&A.”
Feeling similarly confident was Club Mediterranee, which is also looking for more money in its ongoing takeover saga, as the battle continues between China’s Fosun International and Italy’s Global Resorts.
CEO Henry Giscard d’Estaing is reported to favour Fosun, which has been a minority owner of Club Med for four years. He told Bloomberg that Fosun would help the group expand, particularly in China and Brazil. The latest bid from Fosun valued the group at but was promptly trumped by an improved offer from its rivals edging EUR0.50 per share ahead; a level at which Giscard d’Estaing professed himself worried the new owners would need to make cuts, in order to get value out of their acquisition.
Now might be a good time for Club Med to get out while the going is good. Last month saw the group report that weaker demand in Europe, unrest in the Middle East and Ebola fears in Africa had hit bookings and helped push it to an annual net loss of EUR9m, the same as the previous year. The group incurred a EUR13m charge during the year related to closing some lower cost sites in Egypt, Tunisia and Turkey, as it looks to reposition itself in a more upmarket sector.
For both Center Parcs and Club Med it currently appears to be a sellers’ market. How long this will last is up for debate. This year has been a buoyant one for the transactions market in the UK and Continental Europe, with increased cash chasing deals as banks have looked to offload assets.
Looking forward in the UK, PwC has forecast that “deal volumes in 2015 could be constrained by a potential limit to available supply in provincial portfolio deals, similar to the lack of product experienced in London recently”. The company added: “We believe the private equity houses will remain active and interested buyers, especially where there are opportunities to make potential cost savings through the integration of hotel portfolios with existing management platforms.” While Center Parcs and Club Med are not the traditional hotel assets, the welcome given to them by the consumer appears to have been good enough to convince potential buyers.
At last week’s Henry Stewart event in London, Paul Thomas, director at Whitebridge Hospitality, told delegates that, with many investors being priced out of London, there was an appetite for deals outside the capital, particularly portfolios. Taking over from the US private equity groups were likely to be Asian investors, a phenomenon which Club Med looks set to profit from.
HA Perspective [by Chris Bown]: The Center Parcs business has been an incredible success, and operates effectively fully booked year round; even the new location at Woburn was fully booked at opening. Such occupancy suggests there is room in the UK market for more sites, though it will be difficult to find them. Each location demands a large footprint, and a semi-rural location, space that is hard to find, and harder to get permission to build on, given the UK’s notoriously tight planning regulations.
Given those restrictions, and the fact that occupancy can’t be improved upon, what is the upside for a new investor? BC Partners and their pension fund partners must believe the brand can be extended either in the UK or internationally. The Dutch are fans of holiday parks, witness Wyndham’s 51 Landal Green Parks, which are also more modestly present in Germany.
Meanwhile, the frenzy around Club Med looks to be drawing to a close, as the increments of the bids from the sparring takeover partners get ever smaller. The chief executive has already expressed concern that the price is getting too high – but will that stop the bidders? Perhaps they should hire Blackstone’s Center Parcs management team, to sharpen up the lacklustre performance of the company.