Hotel chain Barceló has proposed a merger deal with NH Hoteles whereby it would own 60% of the new group. The tie-up of the two chains would create a sector leader in Spain and the third biggest hotel chain in Europe. The new entity would have over 600 hotels and 109,000 rooms. For the time being, however, it seems the operation is in a very initial phase of development, with just a declaration of intentions. Notwithstanding, trading in NH Hoteles’ shares was suspended by stock market regulator CNMV before the market opened.
The proposed valuation of the transaction would imply a 27% premium on the average share price over the last three months.
In Renta 4 analysts’ opinion, the operation is credible and would also make “strategic sense”.
It would generate synergies due to the fact the two hotels are complementary in both geographical and business terms. Barceló is more focused on the holidays segment, with a significant presence in the Carribean and the US. Meanwhile NH is centred on the urban segment and has an important presence in Latin America.
Barceló has 33% of its hotels in Europe and the Mediterranean, 18% in Latin America and 49% in the US. In the case of NH, 27% of its hotels are in Central Europe, 25% in Spain, 21% in Benelux, 18% in Italy and 9% in Latin America.
Sincé 2015, Barceló has carried out two important acquisitions. On the one hand, the buy of Occidental Hoteles, which has allowed it to boost its presence in Mexico, Colombia and the Carribean. And on the other hand, the acquisition of Crestline & Resorts, with hotels in the US.
For now, the details of the operation with NH are unknown, although it looks like the Barceló group will hike capital to finance it. According to Bankinter analysts, if the deal finally materialises the new company would have shareholder funds of at least 2.749 billion euros and net debt of 1.241 billion. Their initial evaluation of the operation is:
The control premium looks interesting and once the trading suspension is lifted, NH shares should see strong gains. If it goes ahead, we believe Barceló would have to launch a full bid for NH, unless the CNMV waves this obligation.
Other synergies which would arise from the possible merger could be between 20% and 30% of NH’s EBITDA (between 45 and 70 million euros). “So applying a multiple of 10,0x, we believe the valuation would include the synergies,” says ACF’s Javier Díaz
