Raffles' Owner Partners To Buy Fairmont

Fairmont Hotels & Resorts Inc. announced today that it has entered into an acquisition agreement with Kingdom Hotels International and Colony Capital whereby Fairmont will sell all of its outstanding common shares at a price of $45 per share in a deal likely to close next quarter.

Kingdom and Colony expect the value of the transaction, including Fairmont's debt and the cost of combining the chain with Colony Capital's Raffles Hotels & Resorts brand, to be approximately $5.5 billion. The cash transaction, without the Raffles integration cost, would be $3.9 billion. The bid for all of Fairmont's shares represents a 28 percent premium over Fairmont's Nov. 4, 2005, closing share price, the price at which it was trading on the New York Stock Exchange the day before U.S. financier, Carl Icahn, tendered a bid for majority ownership at $40 per share, an offer Fairmont turned down.

Fairmont's board of directors unanimously approved the transaction and will recommend to its shareholders that the sale be approved. "We are very excited about this transaction as it delivers value to our shareholders and creates an expanded foundation from which to build on our legacy, grow our brand and create significant opportunities for our employees," said William Fratt, Fairmont's CEO, in a press release.

Kingdom and Colony advised Fairmont that they plan to combine the Fairmont and Raffles portfolios-Raffles owns and manages 33 properties in Asia and Europe-after the transaction is completed, converting the two companies into a luxury global hotel leader with 120 hotels in 24 countries. Fairmont will remain an independent hotel management and ownership company and Raffles will retain its independent brand identity.

HRH Prince Alwaleed bin Talal bin Abdulaziz Alsaud, chairman of Dubai-based Kingdom Hotels, believes the combination of Fairmont and Raffles along with its Colony partnership will be fruitful. Kingdom previously owned 5 percent of Fairmont. "As one of Fairmont's current shareholders and strategic partners, Kingdom has long recognized the company's existing value and potential," he said in the statement. "We look forward to partnering with Colony and working with both Fairmont and Raffles' management to take the combined companies to a new level of achievement."

Jan Freitag, vice president of Smith Travel Research, cited the tremendous growth within the luxury segment that is attracting investors. "The luxury segment is doing extremely well where the average room rate is at $250," he said. "It especially shows, at the high rates, the segment is very attractive to investors and that a lot of capital is out there looking to move into the hotel industry."

The company expects to close the proposed transaction in the second quarter of 2006, after shareholder and court approvals.