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Action Hotels receives bid approach

The indicated offer terms of 24p represent a 50% premium to last night's mid-market closing level
Takeover bid
Action Group Holdings has been permitted to undertake confirmatory due diligence and this process is ongoing

Action Hotels PLC (LON:AHCG), the hotels group focused on the Middle East and Australasia, looks set to go private.

An agreement has been reached on the terms of a possible cash offer of 24p a share. Shares in Action Hotels closed last night at 16p.

READ: Action Hotels PLC makes encouraging start to 2018

The offer is being made by Action Group Holdings, a group that is backed by existing Action Hotels PLC directors Sheikh Mubarak A M Al-Sabah and Rawaf Bourisli. Two independent Action Hotels directors, Alain Debare and Stefan Allesch-Taylor, have both indicated they intend to vote in favour of the possible offer and to accept the offer in respect of their shareholdings.

The announcement overshadowed the release of full-year results from Action Hotels, which revealed a decline in adjusted underlying earnings (Ebitda) to US$14.2mln in 2017 from US$18.5mln in 2016, largely because this year there was no boost to paper-based profits from land revaluations, whereas in 2016 the group had enjoyed a US$4.5mln boost.

The group reported a net loss before tax of US$14.1mln versus a loss the year before of US$6.3mln, reflecting the impact of pre-opening and financing costs and the depreciation of the value of new hotels.

Revenue increased to US$58.28mln from US$53.10mln, with the group’s mature hotels generating consistent revenue and underlying net profitability. The more recent additions to the portfolio tend to achieve operational break-even in the first three months of operation, the company said. During 2017, the adjusted net asset value increased by US$18.2mln to US$224.5mln.

The first quarter of the current year saw revenue rise by around 11% year-on-year due to the impact of new hotel openings. Average occupancy levels rose to 81% from 77% in the corresponding period of 2016 while the average daily rate eased a little, which meant the revenue per available room (RevPAR) grew less swiftly than occupancy levels, to 81% from 77%.

Funding

The group is currently in the process of securing further funding from the refinancing of existing loans and is also approaching new lenders.

The board elected not to declare a final dividend in respect of 2017.

"We remain focused on driving performance at our operating hotels and our full year results reflect the solid performance of our mature hotel portfolio, as well as the encouraging success of our newest hotels as they gain traction in their respective markets,” said Alain Debare, the chief executive officer of Action Hotels.

“We have a pipeline of a further two hotels in development, with the company's current expectation of 16 operating hotels by the end of 2019," he added.

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