Dalata Hotel Group’s shareholders have approved a EUR455m reverse takeover of the Moran Bewley’s Hotel Group.
The deal will give Dalata, already the largest hotel group in Ireland, a platform for growth in the UK, through acquisitions and new builds.
Under the terms of the agreement, Dalata will acquire nine of the Moran hotels, a total of 2,506 rooms, but not the Red Cow Moran Hotel and Red Cow Inn in Dublin, which will remain under the control of Tom and Sheila Moran.
The company said that it would rebrand a number of the Moran Bewley’s Hotels from three star to four star hotels. Media reports have suggested that Dalata will drop the Bewley’s name and launch a new brand.
Pat McCann, Dalata CEO, said: “The acquisition of the Moran Bewley’s Hotel Group is a transformational development for Dalata, it is a business we have admired for a long time and the acquisition is a rare opportunity to acquire a large well invested portfolio of hotels.
“We have now fully invested the proceeds from our IPO in line with our investment strategy well ahead of schedule.”
The company said that the deal would allow it to scale up its operations “significantly” and in particular expand its position in the key Dublin market. The four Dublin-located Moran Bewley’s Hotels contain a total of 1,423 rooms.
The acquisition also gives Dalata exposure to three UK hotel markets: London, Manchester and Leeds. In addition to the extension currently under construction at the Chiswick Moran Hotel, there are some further development opportunities at Bewley’s Hotel Dublin Airport and Bewley’s Hotel Leopardstown.
Moran Bewley has been in play for some months, with discussions thought to have been underway since last May. In October, the Sunday Times suggested Dalata was one of three shortlisted bidders for the group, alongside Starwood Capital and Marathon Asset Management. Rothschild was managing the sale, said to have been triggered by an initial unsolicited approach from Dalata.
The company’s debts have been an issue. Moran completed a financial restructuring in 2013 that saw a fresh cash injection in return for a debt for equity swap. Lenders AIB, Bank of Ireland and Canyon Capital took significant equity stakes, in return for cutting net debt to EUR205m.
Dalata plans to issue 18.3 million new shares at EUR2.75 each to help fund the deal, which will see it repay around EUR280m of debt on the Moran Bewley’s group’s books. The remainder of the deal will be fulfilled in cash.
Dalata has been on the acquisitions trail since raising EUR265m in its March 2014 flotation on AIM and currently operates 36 hotels, three of which are owned (a further three hotels are in the process of being acquired). Twelve hotels are operated under lease agreements and 18 are operated under management agreements, with the company commenting that it believed there would be opportunities to purchase the freehold interests of some of the properties that it currently leases.
The group operates 14 hotels under the Maldron brand, 10 of which are three star hotels with the remainder being four star.
Dalata said it would “continue to look at opportunities to acquire further hotels in Ireland as well as review new build opportunities”.
Dalata said that it had seen “strong growth” in 2014, against the previous year, supported by strong incoming visitor numbers and improving domestic consumer confidence. The company has forecast group Ebitda for 2014 in the range of EUR8.1m to EUR8.3m.
Ebitda for the Moran Bewley’s Hotel Group for the six months to 30 June 2014 was EUR14.3m, up 17% on the year, driven by strong market conditions in Ireland and the UK. Ebitda for 2014 is forecast to be in the range of EUR32.5m.
Dalata started life in 2009 operating hotels on behalf of receivers and banks, back when many suddenly found themselves in the hotel business. It has now emerged as a force in Ireland and now overseas, a Phoenix from the ashes of others.
HA Perspective [by Chris Bown]: This acquisition is transformational for Dalata, taking it from a manager of hotels for others – often in a temporary caretaker role – to a hotel group in control of its own destiny. Already, it is beginning to look like a case study for a management textbook, illustrating how to build a business off the back of a recovering market.
With strong equity backing via the flotation, it is likely to find no problem raising the additional funds required, from the markets.
Dalata now has a strong position in the Irish market, and this deal gives it further presence in the UK. With its management team including former Jurys Inn management staff, do not be surprised to see it building its Maldron brand around the UK, once the Moran Bewleys properties are bedded in.