• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

Alwaleed, Gates Lead Deal for Four Seasons

Posted on: Tuesday, 7 November 2006, 06:01 CST

By Barbara De Lollis

An investment group involving two of the world's richest men hopes to take private Four Seasons, the Toronto-based luxury hotel operator.

Four Seasons announced a plan Monday in which a group led by Bill Gates' Cascade Investment and Saudi Prince Alwaleed bin Talal would buy a majority stake for $3.7 billion, or $82 a share. That's a 28% premium over Friday's closing price.

The proposed deal needs approval from company directors and from regulators. Shares soared in trading Monday, closing at $82.50, up 29%. Four Seasons owns or manages 71 hotels in 31 countries.

It's a rich offer for shares already trading at a high multiple of earnings. The offer is 44 times the company's estimated 2007 earnings per share. That price-to-earnings ratio, Deutsche Bank hotel analyst Bill Lerner says, easily sets a record for a deal that takes a hotel company private. The prince had set the prior record with his purchase of the Fairmont chain in May, Lerner wrote in a client report.

Other industry experts found nothing surprising in the richness of the offer.

Mark Woodworth of PKF Consulting says the proposed deal comes at a time when ultra-high-end hotels such as Four Seasons have proved that they can bounce back from the tough times such as those earlier in the decade. In the last five years, he says they "have weathered the storm more effectively than other property types." Further, room rates are soaring, making expensive hotels an attractive investment.

"These investors apparently see a lot of upside in the growth potential of Four Seasons," Woodworth says.

Four Seasons CEO and founder Isadore Sharp, the company's controlling shareholder, says he likes the deal because it benefits shareholders and guarantees long-term stability. At age 75, Sharp says that "the change of ownership was ultimately inevitable."

"This proposal achieves all of my objectives for Four Seasons and my family, and is the only one I am prepared to pursue," Sharp said on a conference call announcing the deal.

For now, the proposed deal would leave Sharp in control. His family's holding company, Triples Holdings, would get a 10% stake in the company.

The groups headed by Gates and the prince would split the remaining stake.

Neither the prince nor Gates is new to Four Seasons. Alwaleed is the company's biggest shareholder, with about 22% of the company as of April 2005, according to Bloomberg News. The Gates Foundation held nearly 6%, as of June 2006, Bloomberg says.

For at least one owner of hotels operating under the Four Seasons brand, the proposed sale makes little difference.

"If it makes management more comfortable, that's great," says Laurence Geller, CEO of Strategic Hotels & Resorts. The company owns three Four Seasons and is building a fourth in Mexico City.

"We are relatively agnostic whether public or private, as long as the brand and management are focused on maximizing the profits for us," Geller says. (c) Copyright 2005 USA TODAY, a division of Gannett Co. Inc.

Source: USA TODAY

More News in this Category