Fairmont Hotels agrees to takeover

Tuesday, January 31st, 2006

Saudi prince and U.S. property magnate make $3.9 billion US offer for the hotel chain

Bruce Constantineau

The Fairmont Hotel Vancouver is one of the hotels included in a friendly takeover bid.

The Fairmont Empress Hotel is an iconic feature of Victoria’s waterfront. Photograph by : Darren Stone, Victoria Times Colonist

Canadian hotel operator Fairmont Hotels & Resorts — which traces its origins back to the historic Canadian Pacific Railway hotel chain — has agreed to be acquired by Saudi prince Alwaleed bin Talal and U.S. property magnate Thomas Barrack in a $3.9-billion US deal announced Monday.

The 87-hotel Fairmont chain — with three Vancouver hotels and a fourth under development — will merge with Barrack’s 33-hotel Raffles Hotels chain, but the two brands will stay separate and Fairmont will remain an independent hotel company headquartered in Toronto.

“From many perspectives, you’re not going to see much difference,” Fairmont chief executive officer William Fatt said in an interview. “It’ll still be Canadian-managed, [with] our head office here.”

The deal comes after Fairmont had earlier rejected a takeover bid from U.S. billionaire Carl Icahn, who assembled a 10-per-cent stake in Fairmont last year before bidding $40 US a share for 51 per cent of the company.

Alwaleed’s Kingdom Hotels International and Barrack’s Colony Capital will pay $45 US a share under the deal, which requires the approval of at least two thirds of shareholders at a meeting expected to be held in April.

The offer adds up to about $3.3 billion US in cash, but will also include an assumption of debt that brings the total closer to $3.9 billion.

Alwaleed, the world’s fifth-richest person with assets estimated at more than $23 billion US, already has a 23-per-cent interest in upscale Canadian hotel chain Four Seasons Hotels. Barrack owns luxury hotel and recreation properties throughout the world, including the Las Vegas Hilton, the Stanhope Hotel in New York and Accor Casinos in Europe.

Fatt said the two acquiring companies have made a strong commitment to keeping Fairmont’s head office in Canada.

“They like our company very much and they’ve indicated that they’re quite happy with management,” he said. “And neither of them have sufficient management people on their own to be able to run an organization like this.”

The Toronto-based chain owns and operates 87 hotels with about 34,000 guest rooms in Canada, the U.S., Mexico, Bermuda, Barbados, Britain, Monaco, Kenya and the United Arab Emirates. Fairmont also owns Delta Hotels, which manages and franchises 38 properties.

Some of the most prominent Fairmont properties in Canada include the Banff Springs, Chateau Laurier and Royal York hotels. B.C. Fairmont properties include the Empress in Victoria, the Chateau Whistler in Whistler, the Vancouver Airport in Richmond and the Hotel Vancouver and the Waterfront in Vancouver.

Another Vancouver Fairmont hotel — the 415-room Fairmont Pacific Rim — is under development near the downtown convention centre and is scheduled to open in 2009. It’s part of a $350-million hotel/condominium project being built by Westbank Properties, and Westbank president Ian Gillespie said the Fairmont buyout is good news for the project.


Kingdom Hotels and Colony Capital are to pay $3.9 billion US to purchase the Fairmont chain. Kingdom Hotels is owned by Prince Alwaleed bin Talal bin Addulaziz Alsaud, a member of the Saudi Arabian royal family listed by Forbes magazine as the world’s fifth-richest person with a net worth of $23.7 billion US.

– The buyout: Will create a 120-hotel chain by combining 87 Fairmont hotels with 33 Raffles hotel properties.

– The B.C. holdings: Hotel Vancouver, Vancouver Airport Hotel, Fairmont Waterfront, and the Fairmont Pacific Rim Hotel, which is under construction. Holdings outside of Vancouver include: The Empress Hotel in Victoria and the Chateau Whistler.

– The history: Fairmont originated as the operator of the Canadian Pacific Railway’s chain of grand hotels, among them the Hotel Vancouver, Banff Springs, Chateau Lake Louise, Chateau Frontenac and Royal York.

It built landmark hotels in cities across Canada, then acquired the CN hotel chain in 1988, Princess Hotels in 1998 and U.S.-based Fairmont in 1999.

It was spun off in the breakup of Canadian Pacific Ltd. in 2001.

Source: Canadian Press, Vancouver Sun

© The Vancouver Sun 2006

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