Richard Curran: Boost as Pat McCann's hotel group Dalata raises €265m in IPO
News that hotel group Dalata has raised €265m in a listing on the Irish and London stock markets is good news on several fronts.
The amount of money raised, well above the mooted €150m to €200m, reflects the appetite for investment in the Irish economic recovery story.
The return of a hotel company to the Irish Stock Exchange is also to be welcomed, given that not that long ago there were two.
Run by former Jurys Group head Pat McCann, Dalata also represents a strong presence in the sector of a group of people who clearly know what they are at. McCann has been busy since setting up the business in 2007, availing of opportunities as receivers took control of hotels, not having a clue what to do with them.
Having a growing dedicated hotel operation with access to capital augurs well for the professional of a sector that is so important for regional employment and tourism.
The Dalata listing funds will be used to acquire a chunk of new hotel assets, possibly 16-25 of them, both in Ireland and the UK. Dalata already runs about 40 hotels, including the 13-strong Maldron Hotel Group.
McCann knows he needs to move quickly to snap up new hotels at bargain basement prices. He is very much a man in a hurry.
But therein lies the slight fly in the ointment. If a company feels it needs to raise €150m to €200m to fulfil its short term ambitions, should it accept another €65m to €115m just because it is on offer?
Most businesspeople would say, absolutely. But it creates its own pressures to buy.
No doubt McCann will find suitable assets to purchase with the money. But others are pouring over these same assets too. Having bought incredibly well and garnered some very good management contracts, is there a danger that McCann could end up paying a little too much for whatever Dalata buys next?
Assets seeking buyers is a great buyers’ market. But buyers chasing assets can result in paying too much.
It seems there are so many big international players with very deep pockets vying for better commercial property and hotel assets, things could get a little expensive.
If that happens, strong marketing coupled with higher room rates will be the chosen method for getting their money back.