Author Topic: REZT - Rezidor Hotel Group  (Read 4064 times)

alwaysinvert

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REZT - Rezidor Hotel Group
« on: September 13, 2017, 09:03:46 PM »
This is a pretty interesting workout situation, with mysterious Chinese super-acquirer HNA Group buying Carlson Rezidor in a private transaction last year, thus getting a majority stake in Rezidor, which prompted a forced bid. The forced bid will get HNA from 50% to 70% of the ownership as soon as the pay off the sellers. That payment is slated for at the latest 29 September at the moment, but HNA has the option to delay the payment further until 3 November. The bid was 34.86 SEK (later dividend adjusted by 0.50 SEK) and the stock now trades around 30.

According to the takeover rules, HNA cannot make another higher bid for six months without compensating earlier sellers. To me, despite a smattering of problems with HNA, this still seems like the most likely outcome. They have closed other much larger deals this year, notwithstanding Chinese capital controls and issues of overleverage, and it would make complete sense from both an organizational and cost perspective to take Rezidor private and consolidate Carlson Rezidor fully.   

I did a more in-depth write-up in Swedish some time ago which can be viewed here: http://vardeinvesteraren.nu/vardeinvestering/analys-av-rezidor/.

Valuation-wise, I have not found another hotel operator that trades at a lower multiple (EV/EBITDA 6). In my write-up I compared it to Scandic's acquisition of Finnish hotel chain Restel earlier this year, and despite Restel being much smaller with no growth portfolio and worse EBITDA margins, it was bought out at the same P/S multiple as Rezidor trades. 

The stock has been left for dead with many institutional investors throwing in the towel, but I think there just may be a catalyst right around the corner in some form or another. The industry has been under heavy consolidation for a couple of years and there's no reason to doubt that will continue. Just last week, news came out about outside takeover interest in NH Hotel, which is a Spanish chain that HNA also has a big stake in. Last year NH was tipped to be combined with Rezidor by the former CEO of Rezidor. In addition, the ousted CEO of NH is the current CEO of Rezidor. 


misterkrusty

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Re: REZT - Rezidor Hotel Group
« Reply #1 on: September 25, 2017, 03:21:09 PM »
this seems interesting.  would you expect HNA to bid for the remaining 30% all at once?  what range of bid prices would you expect?

alwaysinvert

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Re: REZT - Rezidor Hotel Group
« Reply #2 on: September 26, 2017, 07:22:48 AM »
this seems interesting.  would you expect HNA to bid for the remaining 30% all at once?  what range of bid prices would you expect?

They could buy stock over the market or via private transactions, I suppose, but I don't think that will get them very far before the stock appreciates.

Range of bid prices is a good question. A strong majority owner doesn't tend to give a great premium, but to be able to get the remaining shares I think they would have to offer a fair bit above the last offer. I would put the private market value of Rezidor at 10-12 times EBITDA with a bid from HNA not likely to realize all of that upside. On the other hand, theoretically they should be willing to pay more for the last remaining shares.

Note that the stock exchange rules will soon be changed in light of the problems surrounding the bid for Rezidor and that an up to 9 month delay of the payment won't happen again.

http://www.di.se/nyheter/takeover-regler-revideras-efter-rezidor-och-haldex/

alwaysinvert

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Re: REZT - Rezidor Hotel Group
« Reply #3 on: September 28, 2017, 07:33:03 AM »
HNA SETTLES ITS MANDATORY TENDER OFFER TO THE SHAREHOLDERS OF REZIDOR

http://www.hnagroup.com/HNAGroupFile/HNA%20settles%20its%20mandatory%20offer%20-%20ENGLISH.pdf

writser

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Re: REZT - Rezidor Hotel Group
« Reply #4 on: September 28, 2017, 08:18:19 AM »
Unfortunately I missed this thread earlier. I've tried to read your blogpost with Google Translate, looks like solid research. Interesting situation. It seems logical HNA would want to buy out the remaining 30% soon to avoid the difficulties / scrutiny / costs of being a listed company in Sweden (though it is possible I guess that they remain listed for a few years). The most logical price would seem to me the same price as they offered in the previous tender offer or slightly higher. If the amount will be lower shareholders will be pissed and might not tender, if they bid much higher last year's shareholders will be pissed off (also, why should HNA voluntarily pay much more than last year?). Something in the 35-38 range seems reasonable.

At what percentage of ownership does a Swedish majority owner have to make a mandatory bid for all shares outstanding? Is there even such a law in Sweden? Your insights would be appreciated.
When you are dead, you do not know you are dead. It's only painful and difficult for others. The same applies when you are stupid.

dontdodebt

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Re: REZT - Rezidor Hotel Group
« Reply #5 on: September 28, 2017, 08:27:08 AM »
I added quite a bit to my position after the latest news.

This is great news!

alwaysinvert

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Re: REZT - Rezidor Hotel Group
« Reply #6 on: September 28, 2017, 09:13:29 AM »
Unfortunately I missed this thread earlier. I've tried to read your blogpost with Google Translate, looks like solid research. Interesting situation. It seems logical HNA would want to buy out the remaining 30% soon to avoid the difficulties / scrutiny / costs of being a listed company in Sweden (though it is possible I guess that they remain listed for a few years). The most logical price would seem to me the same price as they offered in the previous tender offer or slightly higher. If the amount will be lower shareholders will be pissed and might not tender, if they bid much higher last year's shareholders will be pissed off (also, why should HNA voluntarily pay much more than last year?). Something in the 35-38 range seems reasonable.

At what percentage of ownership does a Swedish majority owner have to make a mandatory bid for all shares outstanding? Is there even such a law in Sweden? Your insights would be appreciated.

This bid was a mandatory bid based on exchange traded averages. HNA bought Carlson Group, which owned 50% of Rezidor and triggered a mandatory takeover bid (which sets in when one owner goes above 30%). Usually the mandatory bid is set at what you paid for the last remaining shares taking you over 30%, but the problem was the exhange did not have rules to cover situations where an owner acquired shares the backdoor way via buying a holding company. 

Thus, there is some suspicion that the valuation given to Rezidor in the Carlson/HNA-transaction was actually higher than the subsequent bid. We just don't know exactly, because they were never forced to reveal that due to it being a private transaction and the stock exchange rules lacking sufficient granularity to deal with it properly.

Former shareholders being pissed off doesn't matter. The only issue is HNA cannot pay more without compensating earlier takers of the bid in six months following the earlier bid. Naturally, such a bid won't happen for just that reason.

As far as I am concerned, the factors here are 1) value, 2) what price can take HNA above 90% thus triggering a squeeze-out? and 3) what is HNA willing/able to pay?

It is possible that your price range can take HNA above 90%, but I would lean towards a somewhat higher range. Remember that in a possible coming bid it is most probably structured to fail completely if they don't get above 90%. A mandatory bid cannot be structured that way as it must offer same term deals as the last sellers got. 

Of course, this sequence of events is not set in stone. It is possible that HNA has some other kind of plan.

writser

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Re: REZT - Rezidor Hotel Group
« Reply #7 on: November 07, 2017, 12:52:18 PM »
« Last Edit: November 07, 2017, 12:54:13 PM by writser »
When you are dead, you do not know you are dead. It's only painful and difficult for others. The same applies when you are stupid.

alwaysinvert

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Re: REZT - Rezidor Hotel Group
« Reply #8 on: November 07, 2017, 03:26:31 PM »
https://skift.com/2017/11/03/hna-group-may-want-to-sell-its-stake-in-a-spanish-hotel-company/

Not exactly going according to plan so far!

Yes, HNA is scrambling for funds all over:

http://www.reuters.com/article/hna-group-divestiture-nh-hoteles/chinas-hna-agrees-sale-and-repurchase-deal-on-shares-in-spains-nh-hotel-idUSL3N1ND5G9
https://www.bloomberg.com/news/articles/2017-11-02/hna-is-said-to-plan-highest-yielding-short-term-dollar-bond

Still, it is hard to square this completely with the price action in Rezidor, because if you look only at fundamental factors that would mean the company could be auctioned off instead of bought fully by HNA. I'm not even sure that is an altogether bad proposition for minority owners. Lots of uncertainty in the situation to be sure. 

dontdodebt

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Re: REZT - Rezidor Hotel Group
« Reply #9 on: December 14, 2017, 09:31:02 AM »
Latest news about HNA decreasing I interpret as a really bad sign.

Seems very far fetched to think that a bid from HNA will come from here, or what do I know?