European vacation

Competition heats up for UK hotel, liquor and fitness company De Vere Group as interest in European hotels continues to grows. By Aaron Lovell

Much like the hospitality market in the US, the European hotel sector is heating up. More participants are chasing fewer deals—making it a great time to be a hotel owner.

The latest case in point: hotel and leisure company De Vere Group tentatively agreed to be acquired for £1 billion (€1.4 billion; $1.8 billion) by Alternative Hotel Group Venice (AHG), a vehicle controlled by property maven Richard Balfour-Lynn and backed by a subsidiary of the Bank of Scotland.

Founded in 2005 by executives from the Marylebone Warwick Balfour, AHG already owns the Verve Venues conference business.

“De Vere is complementary to our existing hotel and conference business and we believe our considerable experience in leisure and property management will help develop to De Vere business,” Balfour-Lynn recently told the Times of London.

But one would-be suitor could kick off a bidding war. Pan-European private equity firm Permira also made a bid for the company, which was reportedly rejected on the grounds that it had too many preconditions. Permira’s bid was also around the 825p-mark.

Following news that that board had accepted the AHG offer, Permira released a statement saying it was “considering its position.”

“Permira has been considering whether to make an offer for De Vere Group,” the statement read. Regarding the AHG offer, the private equity firm “urges shareholders to take no action.”

De Vere has 19 four- and five-star hotels throughout England, Scotland and Jersey, some of which include golf, spa and conference facilities. Notable hotel holdings include De Vere Cameron House on the Southern shores of Loch Lomond and the De Vere Cavendish in London’s tony Mayfair district. The De Vere Belfry has a conference center and is the four-time location of the Ryder Cup, as well as last May’s British Nationals tournament.

With an eye towards expanding into Europe, the group has also inked a deal to manage a golf resort in Murcia, Spain, set to be completed in 2008. De Vere also owns the health and fitness centre chain Greens.

And much like the heralded Taittinger deal last year, De Vere Group has a alcohol-related business line—its G&J Greenall distills white spirits like vodka and gin, including the manufacture of liquor for Bombay Sapphire and Bombay Gin.

The interest in European hotels is illustrated by the blue-chip names reportedly eyeing the De Vere portfolio. Besides Permira and AHG, groups like US private equity real estate group Starwood Capital, Madrid-based hotel group NH Hoteles and James Ritblat’s property investment firm Delancey showed interest in the portfolio. According to Jones Lang LaSalle Hotels, there were more than $20.6 billion in European hotel deals completed last year 

Permira has invested in the hospitality sector in the past, recently looking to exit its budget hotel line Travelodge—valued at around £1 billion—via a sale or public floatation. The private equity firm acquired the business in 2003 for £712 million.

But perhaps the biggest winners in the De Vere story are the shareholders, who hold about 20 percent of the company’s equity. The company’s stock has risen about 15 percent this year. Following Permira’s announcement, shares of the company were trading at more than 842p.