After reportedly raising its bid by 9%, a group led by the Carlyle Group agreed on Friday to buy the budget Chinese hotel chain 7 Days Group Holdings for about US$688 million, taking the company private.
Under the terms of the agreement an affiliate of Keystone Lodging Co., owned by a consortium that includes Carlyle Asia Partners III, Sequoia Capital China Growth 2010 Fund, an affiliate of Actis and other shareholders will pay US$4.60 per ordinary share or US$13.80 per American Depositary Share, each representing three ordinary shares in 7 Days. The price represents a small premium over Thursday’s closing, but 30.6% higher than its price on September 25, the day before 7 Days first received a buyout proposal.
The 7 Days buyout is backed by a leveraged loan of US$120 million, or around 17% of the deal value, from a consortium of mainly Taiwanese banks.
7 Days Group Holdings, Guangzhou, China, has a portfolio of about 1,350 hotels, of which two-thirds are operated via third-party management or brand licensing agreements and one-third by leasing and operating. The company said in a recent investment presentation that it expects to have 2,000 hotels in operation by 2014.
Several reports have stated that many Chinese companies listed on the New York Stock Exchange have been facing increased regulatory scrutiny over corporate governance, lessening the advantage of their listing. In fact, 7 Days stock price has slid 16% over the past year and has lost half of its value since 2010.