M&A shifts to management companies, portfolios amid tenuous time for China

High-end, single-asset hotel sales have been the norm for foreign buyers over the course of this year and the latter half of last year. These were highlighted by Anbang Insurance's acquisition of the Waldorf Astoria and Sunshine Insurance's purchase of the Baccarat Hotel, both in New York.

Both transactions were made before the devaluation of the Renminbi and stock-market sell-off—both worrisome, and causing at least some pause for Chinese investors buying overseas.

“China’s capital outflows are a concern to China, but could be a boon to other emerging markets or even the U.S. as more money is earmarked for U.S. debt,” Alfonso Esparza, a senior currency analyst at Oanda Corp. in Toronto, told Bloomberg in August.

Still, the Chinese are buying, highlighted by the early August acquisition of UK's Kew Garden Hotels, which owns and manages a portfolio of more than 50 hotels, mostly branded under the Holiday Inn flag, by China's HK CTS Metropark Hotels Co. from its previous joint owners, Goldman Sachs and TPG Special Situations Partners.

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The deal was said to be worth £400 million, or around US$620 million.

Portfolios and management companies are also being snapped up by investors other than Chinese.

In early August, Quantum Strategic Partners, a private investment fund managed by George Soros' Soros Fund Management, bought Brazil's Atlantica Hotels, one of the largest hotel management companies in the country.

Today there is news of the latest portfolio buy. Thailand’s construction contractor Thai Industrial and Engineering Service will reportedly set up a 50:50 joint-venture company with Fico Corporation to take over Jupiter Hotels Holdings, a UK-based hotel operator, for around US$119 million.

Jupiter's hotels stretch from London to Glasgow, and mostly under AccorHotels' Mercure brand.

The JV will acquire 100 percent of JHH’s paid-up capital, at a par value of one pound each, from Patron Jupiter Holding SARL and West Register Hotels (Holdings) Limited, indirectly held by Patron Capital LP and Royal Bank of Scotland, respectively, Deal Street Asia reports.

JHH indirectly holds the entire shares in Jupiter Hotels Co, which operates 26 hotels with total 2,883 rooms in the UK.

“This will be our first diversification into the hotel business and first expansion outside Thailand. We not only expect return from the operation but also see the opportunity to turn these assets into a real estate investment trust (REIT) in the future,” said Thai Industrial managing director Tradsin Chongussayakul.

The hotel industry continues to be ripe for acquisition and consolidation. As China's economic drama plays out, expect buyers from other countries to become more active in M&A, with targets stretching from the U.S to the UK.