Majority of Chinese citizens prefer to explore other places during the biggest Chinese holiday. (Photo : Reuters)
In what is considered to be China's largest hotel acquisition, Groupe Du Louvre, Europe's second-largest hotel conglomerate, was bought by one of China's largest hotel groups Shanghai Jin Jiang International Hotels Development Co. Ltd. for the staggering amount of $1.4 billion.
The deal was further accelerated with the China Securities Regulatory Commission's policy released last October, eliminating the requirements for approval in cash deals by listed companies and corporations.
Based on the stock exchange filing by Jin Jiang, their company has agreed to buy the Groupe Du Louvre from U.S. investment firm Starwood Capital for the amount of $1.42 billion. The filing also said that the all-cash acquisition, which was first announced to the public last November, will be through Star SDL Investment Co., an affiliate of Starwood Capital. The filing further stated that bank financing will constitute a maximum of 70 percent of the deal.
Chinese firm Hony Capital revealed last June that they spent $246 million for a 12.43-percent share in Shanghai Jin Jiang International Hotels Development Co. Ltd., making it the second-largest shareholder after Jin Jiang parent company.
Since its establishment in 1976, Louvre Hotels Group operated more than 1,100 hotels in 46 countries under seven subsidiaries including Campanile, Kyriad, Golden Tulip and Premier Classe. The company's profits amounted to 62.6 million euros in 2014, an increase of 11.8 million euros from 2013.
The business relationship between Jin Jiang and Louvre Hotels Group started back in 2011 when the two hotel giants decided to form a partnership and introduced branding and other marketing programs to selected hotels in China and France's major cities.
Jin Jiang revenue increased from 2.8 billion yuan to 6.6 billion yuan between July 2013 and June 2014. With this endeavor, Jin Jiang's earnings before interest, tax and amortization almost doubled from 1 billion yuan to 1.9 billion yuan.
Expert opinions dictate that the acquisition will help Jin Jiang further increase its sales and profitability, especially at this time where Chinese tourists prefer to travel to Europe during holidays.
Ctrip, largest online travel agency, released a recent survey stating that half of Chinese tourists declared Europe as their favorite destination this coming Spring Festival.
Chinese tourists' destination preferences are pushing Chinese investors to buy hotels abroad. A case in point is last year's acquisition of a celebrated New York hotel Waldorf Astoria by Chinese firm Anbang Insurance Group Co.
