Saudi prince buys Fairmont

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Saudi prince buys Fairmont
Jan. 30, 2006. 11:18 AM
CANADIAN PRESS

Another Canadian corporate monument is toppling into foreign hands with a deal for Fairmont Hotels & Resorts Inc. to be bought by a Saudi prince and a U.S. property magnate.

Fairmont, which originated in the historic Canadian Pacific Railway luxury hotel chain and counts the Chateau Laurier, Royal York and Banff Springs among its properties, said Monday its board is supporting an offer of $3.3 billion (U.S.) in cash, about $3.8 billion (Canadian), from Kingdom Hotels International and Colony Capital.

Including assumed debt, the deal is valued at $3.9 billion (U.S.) or $4.5 billion (Canadian).

Kingdom Hotels is owned by Saudi Prince Alwaleed bin Talal, a global investor listed by Forbes magazine as the world’s fifth-richest person with a net worth of $23.7 billion (U.S.).

Colony Capital is a Los Angeles private equity firm run by Tom Barrack, recently described by Fortune magazine as the world’s best real estate investor.

The Fairmont announcement came five days after Hudson’s Bay Co., Canada’s oldest corporation, agreed to be taken over by American businessman Jerry Zucker.

Fairmont, which earlier rejected a partial takeover bid by U.S. billionaire Carl Icahn, said Kingdom and Colony will pay $45 (U.S.) a share, or about $51.50 (Canadian) at Monday morning’s exchange rate.

Fairmont shares rose 31 cents to $50.77 (Canadian) on the Toronto Stock Exchange and 40 cents to $44.22 (U.S.) in New York after Monday morning’s news.

The offer price is a slight premium to Fairmont’s price of $43.82 Friday on the New York Stock Exchange. It’s a 28 per cent premium over the price Nov. 4 when Icahn made his move, assembling a 10 per cent stake in Fairmont and bidding $40 (U.S.) per share for 51 per cent of the company.

Fairmont’s board is unanimously endorsing the Kingdom-Colony offer.

“This transaction is the ideal means of delivering significant, immediate value to the company’s current shareholders while preserving this Canadian-based company and establishing a solid platform from which to grow,†stated chairman Peter Godsoe.

Kingdom and Colony plan to combine Fairmont with the Asian-based Raffles chain owned by Colony to create a “luxury global hotel leader†with 120 properties in 24 countries.

Fairmont would continue to be based in Canada, and Raffles would also remain a separate brand.

The Toronto-based chain owns and operates 87 hotels with about 34,000 guest rooms in Canada, the United States, Mexico, Bermuda, Barbados, Britain, Monaco, Kenya and the United Arab Emirates.

Fairmont also owns Delta Hotels, which manages and franchises 38 properties.

 

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here's the globe's take.....

By TAVIA GRANT

Monday, January 30, 2006 Posted at 4:40 PM EST

Globe and Mail Update

Fairmont Hotels & Resorts Inc. agreed to be acquired for $3.9-billion (U.S.) by Saudi Prince Alwaleed bin Talal's Kingdom Hotels International and investment firm Colony Capital Inc., thwarting a takeover attempt by U.S. billionaire investor Carl Icahn.

The transaction values the Toronto owner of the Delta Hotels chain at $45 a share, $5 more than Mr. Icahn's bid in December. Fairmont's board unanimously approved the Saudi offer and continues to recommend shareholders reject Mr. Icahn's offer.

If successful, Prince Alwaleed plans to combine Fairmont and Singapore-based chain Raffles, creating a luxury global hotel leader with 120 hotels in 24 countries. Fairmont would continue to remain an independent hotel management company with headquarters in Canada. The prince already owns 3.9 million Fairmont shares.

“As one of Fairmont's current shareholders and strategic partners, Kingdom has long recognized the Company's existing value and potential,†Prince Alwaleed said in a statement. “We look forward to partnering with Colony and working with both Fairmont and Raffles' management to take the combined companies to a new level of achievement.â€

Fairmont shares rose 26 cents to $50.70 (Canadian) in Toronto and 45 cents to $44.27 (U.S.) in New York after the announcement.

“With an expanding international portfolio of exceptional resorts and gateway city properties, our guests will be exposed to new, exciting destinations with different cultures,†said William Fatt, Fairmont's chief executive Officer.

At $45 a share, the buyers are paying about $3.26-billion for Fairmont. The over-all value of $3.9-billion includes debt.

The total value of the complete transaction, including the combination with Raffles, is about $5.5-billion. Raffles owns and manages a portfolio of 33 properties located primarily across Asia and Europe, including its flagship property built in 1887, the Raffles Hotel, Singapore.

Thomas Barrack, Jr., chief executive of Colony called Fairmont and Raffles “an excellent strategic fit with rich histories, global brand recognition and complementary destinations.â€

The transaction is subject to the approval of 662/3 per cent of the votes cast by Fairmont's shareholders at a meeting of shareholders, expected to take place in April, as well as court approval. The proposed transaction is expected to close in the second quarter of 2006, shortly after receipt of shareholder and court approvals.

Prince Alwaleed bin Talal bin Addulaziz Alsaud is one of the world's richest people. Buying Fairmont would add to the investing empire of Prince Alwaleed who has once had or currently maintains stakes in London's Savoy Hotel, New York's Plaza Hotel and Geneva's Hotel des Bergues, according to the Wall Street Journal.

Fairmont's holdings include 87 luxury properties with about 34,000 guestrooms in the U.S., Canada, Mexico, Bermuda, Barbados, United Kingdom, Monaco, Kenya and the United Arab Emirates. It owns Fairmont Hotels Inc., which calls itself North America's largest luxury-hotel management company. It also owns the Delta Hotels chain in Canada.

Kingdom is owned by Prince Alwaleed and his family, who have invested in banking, hotels, media, telecommunications, technology, construction and real estate, entertainment, and fashion. He also holds interests in Four Seasons Hotels and Resorts and Movenpick Hotels & Resorts, along with Citigroup, News Corp., Time Warner, Apple Computers, Canary Wharf and Disneyland Paris.

Colony Capital is a private, international investment firm focusing primarily on real estate-related assets and operating companies. If this transaction is completed, it will have invested more than $20-billion in over 8,000 assets