Scandic Hotels Group has signed an agreement to acquire Restel’s 43-hotel (7,600 rooms) portfolio in Finland for €114.5 million (US$127.6 million) in cash and will become the largest hotel operator in the country.
The Restel portfolio has long-term lease agreements, seven of which are operated under franchise agreements with InterContinental Hotels Group. Most of the hotels are operated under the Cumulus brand and over time they will be converted into Scandic hotels. The seller will remain the landlord for four of the hotels.
“We look forward to operating and developing these hotels under the Scandic brand going forward and to welcome all of the Restel team members and customers to Scandic,” said Frank Fiskers, president and CEO of Scandic, which today has 230 hotels open or under development, 28 of which are in Finland.
“Our hotel portfolios complement each other very well. This deal will give us presence in 15 new locations in Finland and greater exposure in the growing leisure segment,” added Aki Käyhkö, managing director of Scandic Hotels Finland.
On a pro forma basis, as if the acquisition would have been performed January 1, 2016, the acquired operations might have contributed net sales of €203.4 million (US$226.7 million) in 2016 and adjusted EBITDA of €13.7 million (US$15.3 million). The transaction is expected to close late Q4 2017.
Scandic sees good opportunities for sales growth and margin improvement in the acquired hotel portfolio in the coming years. Additionally, costs are expected to decrease through coordinated administration and procurement. Overall, Scandic estimates that over time, the acquired operations have the potential to generate an adjusted EBITDA margin higher than the group’s long-term financial target of 11%.
The total integration and transaction costs are estimated to amount to approximately €25 million (US$27.9 million). As a result, the transaction is expected to initially have a negative effect on Scandic’s earnings per share.
The expected capital expenditure level in the acquired portfolio is estimated to be about 5% of sales in the coming years. Scandic also plans to invest an additional approximately €10 million (US$11.1 million) in renovations in 2018.