InterContinental Hotels Group (IHG) announced it is acquiring a 51 percent stake in Regent Hotels and Resorts for $39 million in cash, with the right to acquire the remaining 49 percent interest in phases from 2026.
U.K.-based IHG said it will bring Regent into its portfolio at the top end of its luxury segment and accelerate its growth globally. This will serve as a catalyst to expand its footprint in the $60 billion luxury hotel segment. The hotel company said it intends to grow the Regent brand from six hotels to more than 40.
“IHG is already one of the world leaders in luxury with our InterContinental Hotels and Resorts brand, but we see significant potential to further develop our global footprint in the fast-growing luxury segment,” said Keith Barr, CEO of IHG. “As one of the pioneers in defining luxury hotels both in Asia and around the world, Regent is an excellent addition to IHG’s portfolio of brands. We see a real opportunity to unlock Regent’s [full potential]."
IHG also announced that its InterContinental Hong Kong will become a Regent Hotel in 2021, following an extensive renovation. This transformation will mark the return of the iconic Regent name back to Hong Kong, where it first opened its doors in 1980 and became synonymous with the city’s luxury hotel offering.
The Regent Hong Kong was rebranded to InterContinental Hong Kong in June 2001.
“The InterContinental Hong Kong is [acclaimed] as one of the world’s best hotels and is prized for its unrivaled views of the Victoria Harbour and Hong Kong Island,” said Goodwin Gaw, chairman of Gaw Capital Partners.
IHG sold the InterContinental Hong Kong, located in Tsim Sha Tsui, for $938 million in July 2015 to Supreme Key, a consortium of investors that is advised by Gaw Capital Partners.
According to IHG, key takeaways from the Regent transaction include the following:
- IHG is to acquire a 51% interest in a joint venture with Formosa International Hotels Corporation to acquire the Regent Hotels and Resorts brand and associated management contracts.
- The 51% interest will be acquired for $39 million in cash, paid in three tranches of $13 million, the first upon the date of completion, the second in 2021 and the third in 2024.
- IHG has the option to acquire the remaining 49% stake in a phased manner from 2026. This will be via a combination of put and call options, is capped, and is based on a trailing 12-month multiple of joint venture income, which would result in a payment of less than $100 million.
- There are currently six hotels (2.0k rooms) in the Regent system. The annual fee income of those management contracts acquired by IHG will be offset by costs associated with the JV.
- There are currently three hotels (0.9k rooms) in the Regent pipeline.
- IHG expects to grow the brand to more than 10,000 rooms (40 hotels) over the long term.
The transaction is expected to close during the second quarter of 2018.
