GLOBAL REPORT—Billionaire Prince Alwaleed bin Talal is mulling options to “monetize” Four Seasons Holdings and Fairmont Hotels & Resorts, according to a Bloomberg report. However, whether that strategy will include a merger, a sale or an initial public offering is unclear.
“Our objective right now is to grow both companies and have a monetization process,” bin Talal said at a conference hosted by Bloomberg this week.
Bin Talal is founder and chairman of Saudi sovereign wealth fund Kingdom Holding Company, which in a 2007 deal valued at $3.8 billion purchased a 95% stake in Four Seasons, along with Microsoft founder Bill Gates. In 2006, it bought a 58% stake in Fairmont Raffles Hotel International, which owns the Fairmont, Raffles and Swissôtel brands, in a $3.2-billion deal that included investors from Colony Capital LLC.
That percentage in Fairmont was reduced to 35% in 2011, when holdings were sold to Voyager Partners Limited.
Kingdom Holdings was not available for comment at press time due to all business in Saudi Arabia being closed on its holy day of Friday. A spokesperson for Four Seasons said the company is awaiting an official comment on the situation. No one returned calls from Fairmont.
The right time
In general, the supply, demand and performance metrics in the hotel landscape make for a frothy IPO market, analysts said, citing Blackstone Group’s September announcement that it would liquidate Hilton Worldwide.
“An IPO is one method of getting an exit route and brings the company to a wider range of investors. This is no different than the owners wanting to see what the appetite for investment is out there,” said Russell Kett, managing director of consultancy HVS in London.
The climate is right for an IPO, Kett said.
“It is no secret that Hilton is expected to launch shortly, and if other people are jumping on the bandwagon, that’s fine. We also have to remember that there are very few publicly quoted hotel companies,” he said.
Kett said that bin Talal even hinting at talk of an IPO would mean that he had to have everyone on his side. Kett also mentioned the mystique of Four Seasons and that in his opinion it “regularly punched above its weight.”
“He’s saying, ‘Please come and join me. Let’s allocate part of the company and see what happens,’” Kett said.
Lyle Hall, managing director of consultancy HLT Advisory, based in Toronto where both Four Seasons and Fairmont have roots, said IPOs are an “investment decision that companies cannot help to overlook right now due to the strong market.”
Hall, however, had misgivings whether joining the two hotel companies together in one IPO was such a good idea.
“The combination of the companies in a single IPO, if this is what will happen, might take something away from the two companies individually. They do not seem to me to be homogeneous. Their cultures are dissimilar,” he said.
“In regard to market appetite, any IPO could include one or both of the companies, but from a hotel operations structure, I see less gained from combining the two,” Hall added.