Ascott Acquires 50 Per Cent Interest In Citadines, A Pan-European Serviced Residence Chain
The Ascott Group Portfolio (PDF)
Investor Presentation (PDF)
Singapore Dec 4, 2002 - The Ascott Group, an international serviced residence company, has entered into an agreement to acquire 50 per cent interest in Citadines, a pan-European serviced residence chain.
Ascott will invest E84.2m (S$147.5m) in the Citadines Group, which has over 5,100 serviced apartments in 46 properties in 18 cities across France, the UK, Belgium, Spain and Germany.
The acquisition brings Ascott closer to its goal of becoming a global serviced residence company with strong international brands.
The acquisition increases Ascott's collection of properties to 117 serviced residences with over 13,500 units in 37 cities. Previously, Ascott had over 8,400 serviced apartments in 20 cities in Asia, Australasia and the UK.
The transaction involves Ascott acquiring 50 per cent of the equity in the Citadines Group, with a call option to acquire the remaining 50 per cent stake by end May 2004.
The acquisition price of E84.2m (S$147.5m) is based on 50 per cent of Citadines' gross enterprise value of E401.4m (S$703m), representing nine times Citadines' FY2001 EBITDA, less its debt and minority interests of E233.0m (S$408.1m).
If the call option is exercised before end June 2003, the price will be computed on the gross enterprise value of E401.4m. If the call option acquisition occurs after June next year, the price will be based on a gross enterprise value that is the higher of E401.4m or 10 times Citadines' EBITDA over the last 12 months.
The acquisition, which will be funded through cash and borrowings, is subject to Ascott shareholders' approval at an EGM to be convened. CapitaLand Limited, which owns 68.9 per cent of Ascott shares, has provided an irrevocable undertaking to vote in favour of the acquisition.
The Citadines Group is jointly owned by The Whitehall Street Real Estate Funds and Westmont Hospitality. The Whitehall Funds are sponsored and managed by Goldman, Sachs & Co. Westmont, the fifth largest hotel owner and operator in the US, holds ownership interests in and manages over 350 hotel properties worldwide.
Expanding in Europe
Mr Liew Mun Leong, Ascott's deputy chairman, and president and CEO of its parent company, CapitaLand Limited, said: "The acquisition presents a unique opportunity for Ascott to establish a foothold in the European serviced residence market. It also serves as an excellent platform for Ascott's further expansion into Europe.
"The two-stage acquisition is ideal as Ascott will be able to phase into Europe, drawing on the expertise and local knowledge of Citadines' strong operational team."
He added: "Citadines enjoys strong brand recognition in Europe. The mid-tier marque complements Ascott's 'Somerset' and 'The Ascott' brands which serve the upper and luxury ends of the serviced residence market. The 'Citadines' brand could potentially be rolled out to properties beyond Europe, such as in China and Australia."
Ascott's chief executive officer, Mr Kee Teck Koon, said: "The acquisition price at nine times EBITDA represents good value, given Citadines' established customer base and its prime property locations in European gateway cities and business centres.
"Citadines' properties have a strong performance track record. Last year, they achieved an average GOP margin of 67 per cent and EBITDA yield of 11 per cent, despite the dampening effects of the September 11 terrorist incidents."
Strengthens Earnings Base
Mr Kee said that the acquisition will also strengthen the quality of Ascott's earnings and income stability.
"As a result of the acquisition, we will have greater diversification across geographic markets, with a higher proportion of our earnings coming from developed countries. Our capital allocation in mature economies will increase from 64 to 70 per cent."
Mr Kee said that in line with its strategy to be asset-light, Ascott may bring in investment partners to acquire the remaining stake.
He added that Ascott's enlarged operating platform across Europe and the Asia Pacific will mean a wider product range for its customers. There will also be synergy benefits from cross selling between Ascott's customer base in the Asia Pacific and Citadines' customers in Europe.
Based on Ascott's proforma financial statements for FY2001, the acquisition will increase its earnings per share by two per cent from 2.66 cts to 2.71 cts, while the call option, once exercised, will increase its earnings per share by 20 per cent to 3.18 cts.
The call option acquisition will enable Ascott to elect for group tax consolidation, to achieve better tax efficiency for the financing costs of the transaction. This will result in a higher increase in Ascott's earnings after tax.
Net tangible assets per share will change from 75.5 cts to 74.9 cts after the acquisition, and to 75.2 cts on the call option acquisition.
Based on Ascott's latest financial statements at end September 2002, its debt-equity ratio of 0.33 will rise to about 0.46 after the acquisition, and to about 0.84 on the exercise of the call option, assuming there is no divestment of Ascott's non-core assets.
Credit Suisse First Boston has been appointed Ascott's financial adviser for the transaction. Goldman Sachs International has been appointed as financial adviser to The Whitehall Funds and Westmont Hospitality for the transaction.
About The Citadines Group
The Citadines Group is a pan-European serviced residence company, with over 5,100 serviced apartments across France, the UK, Belgium, Germany and Spain.
Marketed under the 'Citadines' brand, most of the 46 properties are located in the heart of the gateway cities of Paris, London, Brussels, Berlin and Barcelona. Twenty-six of the properties are in the major French cities of Paris (17 residences), Toulouse, Lille, Lyon, Grenoble and Marseille.
The Citadines Group is jointly owned by The Whitehall Street Real Estate Funds and Westmont Hospitality. The Whitehall Funds are a series of real estate investment funds sponsored and managed by Goldman, Sachs & Co and its affiliates. Goldman Sachs is a leading global investment banking, securities and investment management firm.
Westmont Hospitality, a US-based hotel owner and operator, also provides expertise in the supervision and management of Citadines. Westmont is one of the world's largest privately held hotel companies and the fifth largest hotel owner/operator in the US. Currently Westmont holds ownership interests and manages over 350 hotel properties (about 42,000 rooms) worldwide.
About The Ascott Group
The Ascott Group is an international serviced residence company, owning or managing over 8,400 serviced residence units in 20 cities in 11 countries across Asia, Australasia and the UK.
These include prime properties in gateway cities and business centres such as Singapore, London, Beijing, Shanghai, Tokyo, Jakarta, Hanoi, Ho Chi Minh City, Sydney and Melbourne.
The Ascott Group pioneered the Asia Pacific's first branded luxury serviced residence in 1984. Today, it boasts an 18-year industry track record and serviced residence brands that are market leaders in the Asia Pacific.
The group's luxury 'The Ascott' brand projects an elegant lifestyle appealing to top executives. The 'Somerset' brand offers stylish, contemporary living for senior to upper management executives.
Headquartered in Singapore, The Ascott Group's shares trade as 'Ascott' on the Singapore Exchange. It is the serviced residence arm of Capitaland Limited, one of Asia's largest listed property companies.
For reservations on Ascott properties, call Central Reservations at (65) 6272-7272 or visit the group's website at www.the-ascott.com