Club Mediterranee SA; market cap (as of 14/11/2014): €843.79m
KKR & Co LP; market cap (as of 14/11/2014): $17.94bn
KKR & Co LP; AUM: $102.3bn
On November 11, Italian tycoon Andrea Bonomi, made a new bid for a controlling stake in the French tourism operator chain Club Méditerranée (Club Med). The new cash offer proposed in consortium with KKR, GP Investments and Sol Kerzner prices each share of the hotel group at €23, above the previous bid by Gaillon Invest II of €22 in September. This new valuation would give Club Med a market value of €874m.
Gaillon Invest II, the previous bidder for Club Med, is an investment vehicle composed of Fosun, French group Ardian, Club Med’s management, U-Tour, and an online Chinese travel agent. The group’s first bid in May came in at €17 a share, but was rebuffed by management to a price of €17.5. Another bid from Mr Bonomi in June pushed the bid price up to €21 per share.
In his attempt to acquire Club Med chain, Mr Bonomi via the special purpose vehicle Global Resorts also purchased additional 2.1m of the hotel chain shares. This deal boosts the Global Resorts’ stake in capital to 18.9% and its voting rights to 17%, becoming Club Med first shareholder on the list. Since KKR has become a minority partner in this bid, Global Resorts has guaranteed the private equity firm two seats in the board of the target if the offer were to be accepted.
Global Resorts follows the same strategy as its competitor did in buying the shares. Thus, earlier in September Fosun also stated that it had acquired about 9% of the Club Med shares from Ardian and raised its stake in the target to 18%.
Both potential acquirers believe that Club Med has considerable growth prospects. Club Med from its foundation in 1950 offers no-frills, fitness family services. The growth had been rapid and the chain had more than 100 all-inclusive resorts all over the world by the beginning of the 1990s. However, due to the increased competition over the last 20 years and in addition to Europe’s recent economic troubles, the growth stagnated and there is an obvious need to search for new areas to develop.
Fosun and Ardian’s main strategy to boost growth for the all-inclusive resort chain is to focus on emerging markets, where the recent economic slowdown has not cut vacation spending to such an extent. On the contrary, Mr Bonomi is convinced that the key to success is not a heavy focus on China, but a broader approach with investments both in Europe and other emerging markets apart from only China.
However, with time and public confrontation the differences in the strategy have begun to disappear, the main concern remains the price to pay.
The next move now is up to Fosun and its partners, whether they bid higher or leave Club Med to the Italian investor backed by private equity firm, KKR. For Club Med, its entire growth strategy is at stake, and this has meant a considerable rise in its share price since the beginning of the speculations: up by 26.5% (€19 on Jun 27, to €23.5 on Nov 14). No matter who wins there is another important question open, if the Club Med chain will be taken private or left public as it is.
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