Singapore Raffles group sells hotels at $859 mln - Tuesday 12th of July 2005

U.S. investment firm Colony Capital is to buy the entire business of Raffles Holdings, owner of Singapores landmark Raffles Hotel and the Swissotel brand, for S$1.45 billion ($859 million) cash.

Raffles Holdings (RHLT.SI: Quote, Profile, Research) said it would book S$605 million gain on the sale of 41 hotels, including 26 Swissotel hotels and resorts in Europe and America. Shareholders, including Singapores CapitaLand Ltd. (CATL.SI: Quote, Profile, Research) which owns 60 percent, will get S$837 million through a S$0.40 a share special dividend. The 118 year-old colonial-style Raffles Hotel was once described by British author Somerset Maugham as a symbol of "all the fables of the Exotic East".

Raffles Holdings Chairman, Cheng Wai Keung, said the company had decided to sell its entire business of 12,000 hotel rooms because to grow it would require significant capital, and because asset prices were high.

"The current active M&A market presented a timely opportunity for Raffles Holdings to realize value in the business," he said.

Colonys assets include a baseball stadium in Japan, a French steakhouse chain, and European budget hotels and casinos in Las Vegas. Past investments include Londons Savoy Group, New Yorks Stanhope Hotel and the Amanresorts hotel chain in the U.S. and Asia.

Colony said the deal also involved the assumption of S$220 million of debt and S$53 million of minority interests, making an enterprise value of about $1 billion.

Raffles Holdings said it would form a committee to review its options on what to do with remaining proceeds after the special dividend payout.

SURPRISE SALE

Singaporeans expressed surprise at the sale.

"This is sad news. The hotel has been Singapores pride and is famously associated with Singapore the world over," said Sharon Cher, 26, a fashion writer. Singapore cannot afford to sell off part of its already small heritage."

Affandi Salleh, 45, the managing director of a local company, said Raffles Hotel should be owned by a Singapore company because of its heritage value.

"Conditions should be laid out to the new owners to ensure that they will continue to keep up the hotels present image," he said.

As part of the deal, Raffles Holdings, advised by Credit Suisse First Boston, will have an option to buy back the lease of the Raffles Hotel after 82 years. The company will also continue to own certain assets, including antiques and memorabilia, but has agreed to loan these assets to Colony for display at the hotel. Raffles Hotel is named after Sir Stamford Raffles, who founded a trading station on the island of Singapore in 1819. The building has 103 suites after a S$160 million refurbishment in 1991 and was declared a Singapore national monument in 1987.

In 2003, Raffles Holdings unveiled a strategy aimed at growing revenues by securing more hotel management contracts and selling some of its properties. Of its 41 hotels, 14 are majority-owned or leased.

Colony Capital chairman Thomas Barrack said the group respected the historical significance of the Raffles Hotel and considered it a responsibility "to protect that legacy".

In Singapore, Raffles Holdings owns the Stamford (Southeast Asias tallest hotel), the Swissotel, the Merchant Court Hotel and the Raffles Hotel. In 2001, it acquired Swissotel for 410 million Swiss francs ($318 million).

The group also owns several historic hotels in the region, including the Raffles Grand Hotel dAngkor in Siem Reap, Cambodia.

Trade in shares of Raffles Holdings and CapitaLand was halted on Monday. Raffles stock closed at S$0.68 on Friday, while CapitaLand ended at S$2.39.

The deal is subject to approval by Raffles Holdings shareholders. ($1=1.288 Swiss Franc) ($1=1.689 Singapore Dollar)

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