IGB seeking full control of Renaissance KL

TOTAL MANAGEMENT: Group has offered to buy half of Great Union, owner of the five-star hotel, from Stapleton and Chong Kin Weng for RM277.5 million

IGB Corp Bhd plans to buy up half of the five-star Renaissance Kuala Lumpur from its Hong Kong partner for RM277.5 million.

The 15-year old hotel, located at the corner of Jalan Ampang and Jalan Sultan Ismail, is the largest hotel in the capital with a 921-room inventory. It is owned by Great Union Properties Sdn Bhd, which is 50 per cent held by IGB.

IGB has offered to buy the remaining 50 per cent stake in Great Union from Stapleton Developments Ltd and Chong Kin Weng. Stapleton is a unit of Hong Kong-listed New World Development Co Ltd, while Chong is a partner in a legal firm in Malaysia.

In the year ended December 31 2010, Great Union posted earning before interest, depreciation and tax (ebita) of RM24 million, while its net assets were worth RM116.6 million.

In a statement to Bursa Malaysia, IGB said that the price was 8.5 times that of the hotel's 2010 ebita and the valuation of the hotel at RM710 million net of bank borrowings and shareholders loan.

Total cost of investment in Great Union post-acquisition will be RM503 million.

The development is interesting given that it is no secret that IGB has always been open to the idea of disposing of the hotel. In fact, it is believed that it was seeking some RM850 million for the hotel.

Nevertheless, this purchase could be in preparation to sell the entire hotel at a later stage. IGB officials were not immediately available for comment.

IGB told the exchange that with the full management control, it will be able to execute its business plans and strategies more effectively.

Initially, the hotel was divided into a four-star New World block and the five-star Renaissance block.

In 2004, in line with its global strategy to streamline hotel names, the New World name was dropped and the popular Renaissance name was adopted.

The Renaissance name became more popular and the company wanted to develop the name. The New World name is used more in China, a senior hotel manager told Business Times in a previous interview.

The management contract between the owners and Marriott International, which is operating the hotel as a Renaissance, is expected to expire in four-and-a-half years.

IGB operates hotels under the Cititel and St Giles brands. It also owns and operates Micasa All Suites as well as Boulevard Hotel and The Gardens Hotel in Mid Valley.

By Business Times