New York-based $1.2-billion Strategic Hotels & Resorts Inc., which owns some of the best-known luxury lodgings in the US like Essex House and Ritz-Carlton Half Moon Bay in California, is beeping loud on the takeover radar following the exit of its founder Laurence Geller as CEO and President.
A host of investors including foreign investors, opportunity funds, private equity (PE) and real estate investment trusts (REITs) are reportedly closely watching the developments within Strategic Hotels with an eye on a potential takeover opportunity.
Strategic Hotels's valuation is seemingly attractive. A recent report refers to JMP Securities LLC's observation that a buyer could offer $8 a share, a 32 percent premium, and still obtain the company's luxury hotels at a discount to their net asset value. However, investors would also be cognizant of the fact that Strategic Hotels is losing money and is seen to have a volatile cash flow. Analysts have also projected that the company will not return to profitability any time before 2014.
While Strategic Hotels's Chairman Raymond Gallein has refuted any claims of receiving expressions of interest from potential investors, the company's unique portfolio of assets makes it a strong takeover candidate. Gallein will soon succeed Galler as CEO, whereas Galler himself is restrained from making a bid for the company for 18 months as per his separation agreement.
Strategic Hotels has a sizable presence in the luxury hotels and resorts segments in the US, Mexico and Europe. The company currently has ownership interests in 18 properties with an aggregate of 8,271 rooms and 851,600 square feet of meeting space. Its properties are currently run by management companies that include Four Seasons Hotels and Resorts, Marriott International Inc., Loews Corp., and Ritz-Carlton Hotel Co.
Investor interest in Strategic Hotels is growing at a time when there is a steady increase in takeover attempts in the lodging space, especially in the US. It may be recalled that Indian Hotels Co.'s has made an unsuccessful bid for Orient-Express Hotels Ltd.
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