Hotel sale success for Ratos

Swedish private equity provider, Ratos has realised a SEK1.7 billion profit via the sale of its holding in Scandic Hotels to the Hilton Group. Hilton Group is paying SEK144 per Scandic share, a total of SEK2.2 billion for Ratos’ holding in Scandic. Of this amount 75 per cent is to be paid in cash and 25 per cent in newly issued Hilton shares. A majority shareholder, Ratos acquired its 25 per cent stake in the hotel chain in 1983.

Scandic’s history dates to 1963, when America-owned oil company, Svenske Esso set up a roadside motel in the Swedish province of Nrke. In 1963 the first Esso Motor Hotel opened in Mlndal and this chain of hotels soon developed into the biggest hotel chain in Sweden. Twenty years later Esso Motor Hotel was sold to a Swedish consortium of which Ratos is a joint owner and the following year the chain was renamed Scandic Hotels.

In the early 1990s the hotel operator role was streamlined with the sale of the hotel properties and then in 1996 Scandic was listed on Stockholm-sbrsen. It is hoped the merger with Hilton will lay the foundations for a strong chain of hotels with excellent prospects for further growth.

Clara Bolinder-Lundberg of Ratos is pleased with the acquisition, saying: “We had this stake in Scandic since 1983 and it’s developed really well, particularly in the last few years. For Scandic’s future this merger was a logical industrial move, but it was also financially a very good offer for us.”

She added that since 1999 Ratos has been following a new strategic orientation. During the 1990s the firm invested mainly in listed companies. This has now changed and Ratos is more focused on committing primarily to unlisted companies. The acquisition with 3i of Swedish private equity investor, Atle, which took place earlier this year (see evcj March, page 3), is in line with Ratos’ strategic objectives. Atle’s investment portfolio is being divided between 3i and Ratos in the approximate ratio of 60:40 by value.

Roland Nilsson, president and chief executive officer of Scandic, sees a very clear industrial logic in the deal, saying the Nordic region represents an important area for any chain of hotels with a pan-European growth strategy.

He said: “The combination of the global strength of the Hilton brand and Scandic’s strong regional position creates significant scope for revenue synergies. Scandic’s and Hilton’s hotels are an excellent geographical fit and the groups have a similar customer focus and cultural affinity.”