China's richest man targeting luxury US hotel chains
Four Seasons is top of Wang Jianlin's wish list but he may also settle for group of smaller hoteliers, writes Nadja Brandt
FRESH from splurging over €300m to buy out the Irish-led investors in luxury super yacht maker Sunskeer, China's richest man is now going after swish hotels, with the Four Seasons among those on his menu.
Wang Jianlin, owner of commercial land developer Dalian Wanda Group, said this month he hired two investment banks to buy hotel management companies, mostly in the US, where a recovery in travel is boosting lodging demand.
Closely held Four Seasons Hotels & Resorts, operator of properties in Manhattan and around the world, would give Mr Wang a high-end, globally-recognised brand.
With few big luxury names officially for sale, he may settle for a compilation of smaller, lifestyle hoteliers such as Morgans Hotel Group, which manages Mondrian and Delano properties.
While Morgans's enterprise value is the most expensive relative to profit among US lodging peers, Dalian Wanda's revenue is forecast to exceed $100bn (€73.8bn) by 2020 and Mr Wang has a net worth of $12.7bn. Mr Wang's ambitions may also lead him to high-end boutique chains Viceroy Group in Los Angeles and Kimpton Hotel & Restaurant Group of San Francisco.
"It's part of a larger trend," says James Macdonald, Shanghai-based head of China research for Savills estate agents. "Chinese companies are starting to look at diversifying out of China and bringing intelligence and market experience from operating overseas back to the China market.
"It's also about taking experience of the China market overseas to try to get the best of both worlds."
A Beijing-based representative for closely held Dalian Wanda declined to comment on potential takeover targets.
Dalian Wanda plans to build five-star hotels at a rate of 15 per year and in as many as 10 major cities around the world, including London and New York, Mr Wang said at the World Economic Forum in Dalian this month.
The 58-year-old billionaire said he has been in talks with "several" companies in the past year.
Mr Wang is China's wealthiest person. In addition to 40 hotels, Dalian Wanda runs at least 49 commercial properties across China and 40 department stores from Beijing to Nanjing, according to its website. The 25-year-old company is owned by Mr Wang and his son Wang Sicong.
Hotel chains in the US have benefited from demand in the lodging industry, with shares of Starwood Hotels & Resorts and Marriott reaching multi- year highs in May. Hilton, owned by the Blackstone Group, this month filed to raise $1.25bn in an IPO.
Revenue per available room, the industry's measure of average daily room rates and occupancies, is still expanding. After rising 6.8 per cent last year and 8.2 per cent in 2011, forecasters say it will increase 5.7 per cent this year and six per cent in 2014.
"For any buyer like Wang, it is a very good time to buy into this sector since we still have several years ahead of growth in the hospitality industry," said one industry analyst.
Four Seasons, with 91 luxury properties in 38 countries, would fit Mr Wang's ambitions. The Toronto-based company hired Allen Smith, the head of Prudential Real Estate Investors, as CEO in August to help the hotelier expand.
Bill Gates's Cascade Investment, Prince Alwaleed Bin Talal's Kingdom Holding and founder Isadore Sharp took Four Seasons private in 2007 for about $3.4bn.
"The brand that would fit Wang's ambitions perfectly is Four Seasons," said an analyst. "Prince Alwaleed loves Four Seasons but he's a practical guy," he said, adding that a sale would be possible at the "right price".
Sorya Gaulin, a spokeswoman for Four Seasons, declined to comment when asked if the company would be willing to sell.
If Four Seasons isn't for sale, Mr Wang may settle for a compilation of smaller high-end hoteliers, such as New York-based Morgans or Viceroy.
"It's a slow process," Mr Wang said earlier this month. "Those companies we liked, they might not be willing to sell. Those willing to be bought, we might sometimes feel the brand isn't as good."
Among boutique hotels that cater to an affluent younger clientele, Morgans, Kimpton or Viceroy could be likely candidates for Mr Wang, say insiders.
"All of them are high-end with locations in urban markets. This presents the opportunity to get Chinese travellers into these hotels and introduce them to brands that can ultimately then be brought to or be expanded in Asia."
Kimpton CEO Michael Depatie and a spokesman for Morgans declined to comment on whether the companies would be interested in selling to Dalian Wanda. A representative for Viceroy didn't respond to requests for comment.
Morgans climbed to an almost two-year high in June when it said it would consider a sale after receiving takeover interest from five potential buyers. Morgans has since had a tumultuous few months, with the board ousted and CEO Michael Gross resigning. Investors including Ron Burkle's Yucaipa and Kerrisdale Capital Management have called for another new slate of directors to help sell the company.
Morgans operates 12 hotels, known for stylish decor and amenities. In addition to Morgans, closely held Viceroy may appeal to Mr Wang with its 16-property portfolio. Kimpton, operator of 62 US properties, may also fit the bill.
It would be more efficient for Mr Wang to target only bigger, top hotel operators, the same way he pursued AMC Entertainment Holdings last year to create the world's biggest cinema owner, says a Hong Kong-based analyst. At the time, the $2.6bn deal was the largest acquisition of a US corporation by a Chinese company.
"If you look at Wanda and what it has done, Wang is now a big movie-theatre owner. He has the money to think big."
©Bloomberg with additional reporting by Nick Webb