The Rafael Group comprises six distinctive luxury hotels in key locations worldwide. The portfolio includes three properties in which the group has a significant equity interest: the well-known The Mark in New York, The Grand Hotel Rafael in Munich and Hôtel du Rhône in Geneva. It also manages the renowned Turnberry Isle Resort & Club in Florida, in which it has a minority equity interest, and two hotels in Austria and Bermuda. Of the total 1,222 rooms under management, 837 are in the hotels in which the group has an equity interest.
In addition to its existing hotels, the Rafael Group has hotel projects in Cambridge, England and Toronto, Canada that are at an early stage of development. The Rafael Group also has an interest in a joint venture to develop, manage and market luxury hotels and resorts, principally in India.
"We are delighted to welcome these award-winning hotels to our Group," said Mandarin Oriental's Chief Executive Officer, Edouard Ettedgui. "They will provide an excellent match for our existing properties in terms of luxury standards, guest service and geographic presence. The acquisition will create greater visibility for the Mandarin Oriental brand in the United States and Europe. In addition, it will have a positive impact on our existing properties and provide attractive financial returns for our Group."
As a result of the acquisition, Mandarin Oriental will have a more balanced geographic presence, with an enlarged portfolio comprising nine hotels in Asia, seven in North America and four in Europe. The Rafael Group has approximately 2,200 employees worldwide in its hotels, regional sales offices and the central corporate office. The acquisition will generate cost efficiencies by spreading fixed costs, particularly marketing related expenses, over a larger portfolio.
Georg Rafael, an internationally renowned hotelier, formed the Rafael Group in 1986. It is intended that Mr Rafael will remain with the Group to assist with the transition and to progress development opportunities.
"I firmly believe that Mandarin Oriental is the right company for us and our future," said Georg Rafael. "Both our groups are consistently recognised as having some of the world's best hotels, and this cultural fit is of great importance to all our guests and colleagues."
The consideration of US$142.5 million will be payable in cash on completion and will be funded from Mandarin Oriental's existing cash resources. The consolidated net debt of the Rafael Group, which at 31st December 1999 was US$15 million, will also be assumed by the Group.
The agreement remains subject to shareholder approval. A circular to Mandarin Oriental shareholders convening a Special General Meeting will be despatched shortly. Jardine Strategic Holdings Limited, which holds a 55.45% direct interest in Mandarin Oriental, has undertaken to vote in favour of the acquisition.
The financial results of The Rafael Group Limited for the year ended 31st December 1999, (restated using Mandarin Oriental's accounting policies), indicate turnover of US$44 million and profit after tax of US$6.4 million. Earnings before interest, tax, depreciation and amortisation (EBITDA) were US$11.7 million. Net assets at historic cost at 31st December 1999 were US$47 million. On the basis of independent market valuations of the hotel properties, net assets would increase by approximately US$74 million to US$121 million.
Mandarin Oriental Hotel Group presently operates deluxe and first class hotels in Bangkok, Hawaii, Hong Kong, Jakarta, Kuala Lumpur, London, Macau, Manila, San Francisco, Singapore and Surabaya. Under development are two deluxe properties, one in Miami (opening late 2000) and the other in New York (opening late 2003).