Shanghai Jin Jiang agrees to buy Louvre Hotels
12 NOVEMBER 2014 9:09 AM
In what some sources saw as a surprise, the Chinese operator of 1,700 hotels won the bid for the Paris-based chain.
GLOBAL REPORT—With two minutes to spare during an opening general session of the 26th European Hotel Investment Conference, panel moderator Nick van Marken of Deloitte asked Accor’s Sébastien Bazin to comment on the group’s pursuit of fellow European power player Louvre Hotels Group.
“Louvre Hotels may have been sold by now,” Chairman and CEO Bazin said.
The statement proved more a display of clairvoyance than playful wit. Shortly after a subsequent networking coffee break commenced, news broke that Shanghai Jin Jiang International Hotels Group struck a deal to acquire the chain for more than €1.2 billion ($1.49 billion), according to various reports citing people close to the matter.
Seller Starwood Capital Group attained the Louvre Hotels portfolio for $3.2 billion as part of its acquisition of the Taittinger hotel and champagne empire in 2005.
“This is a major step and an exciting opportunity for Louvre Hotels Group, its brands (Première Classe, Campanile, Kyriad, Tulip Inn, Golden Tulip and Royal Tulip), its employees and its franchisees,” according to a statement from Louvre CEO Pierre-Frédéric Roulot that was emailed to Hotel News Now.
“We have indeed built an excellent relationship with Jin Jiang since the commercial partnership we established in 2011,” he said. “Moreover, combining our groups together will ensure the continued growth and expansion of our budget and top-end brands, which will be able to strengthen their capacity and capture the strong growth potential that clearly exists in China and, more broadly, in Asia.
“The new combined group will be in the top 10 of the most important hotel players in the world,” he added.
Representatives from Jin Jiang and Starwood Capital did not return request for comment by press time. Terms of the deal, which is expected to close in the first quarter of 2015, were not disclosed.
Jin Jiang’s emergence as the top bidder was something of a surprise, according to van Marken, who heads Deloitte’s travel, hospitality and leisure segment as well as chairing the EHIC event. Though first considered to be the obvious choice when Starwood Capital Chairman and CEO Barry Sternlicht made his intentions to sell known, the Chinese company faded from view as the pool of bidders became more crowded.
Accor, Europe’s largest hotel chain, was one of the more prominent suitors, submitting at least one takeover bid on 5 November.
But Jin Jiang—which in 2011 established a co-branding program with Louvre in France and China to boost travel between the two countries—eventually won the day.
“There was almost an expectation before the deal happened that Jin Jiang was the obvious buyer,” van Marken said, citing the pre-existing relationship between the two companies. “But all of a sudden it didn’t look like they were because the price was fairly substantial. Barry (Sternlicht) set out the score fairly early on in terms of his expectation.”
A relationship between Jin Jiang and Starwood has also been on the books for some time. In December 2006, Starwood Capital entered into a strategic relationship with Jin Jiang. Under the terms of the agreement, Starwood invested $30 million in the Chinese company, making it the largest outside shareholder.
Jin Jiang expands its global footprint by more than 1,100 properties in 47 countries with the acquisition. Louvre’s brand portfolio comprises luxury and budget brands, including Première Classe, Kyriad, Campanile, Golden Tulip, Tulip Inn and Royal Tulip. Jin Jiang comprises more than 1,700 hotels, including 5- and 4-star hotels under the Jin Jiang brand concept and third-party management agreements for other flags as well.
The deal underscores a recent outflow of investment from China, van Marken said.
“The Chinese have spent €3.1 billion ($3.9 billion) on real estate in Europe last year and are expected to spend a lot more,” he said. Given the size of the Louvre deal, “I think you can safely say that’s going to be accurate.”
Recent examples include:
- In October, Chinese firm Anbang Insurance Group agreed to acquire the Waldorf Astoria New York from Hilton Worldwide Holdings for $1.95 billion.
- In September, Beijing-based Reignwood Group bought London trophy Ten Trinity Square, which sits beside the Tower of London, for an undisclosed sum and will partner with Four Seasons Hotels & Resorts to turn it into a luxury 98-room hotel. In the same month, it also bought for £135 million ($220 million) the Wentworth Club outside London, which has 12 rooms.
- In August, Chinese government-owned Greenland Holding Group announced intentions to invest £1.2 billion ($2 billion) on two London properties, including the former Ram Brewery site in Wandsworth and valued at £600 million ($1.02 billion).
- In June, Hong Kong-based Kai Yuan Holdings paid €344.51 million ($463 million) for the 5-star Paris Marriott Hotel Champs-Elysees, which included a management agreement with Marriott International up to 2030 to be automatically renewed for three successive periods of 10 fiscal years.