In August 2018, the ultra-luxury hotel group Belmond announced a loss of $ 16.5 million in the first half of 2018 and a loss of $ 1.5 million in the second quarter, to which its Add up the $ 45.1 million in 2017, the president of Belmond, Roland Hernandez, has no insurance for investors and shareholders, "Given low interest rates, high valuations and the scarcity of quality assets, global investors appreciate the enduring value of luxury real estate and the luxury hotel market is now very dynamic. " On December 14, 2018, 17 hours ago, luxury goods manufacturer LVMH agreed to buy Belmond luxury hotel group for $ 3.2 billion.
Counting among the heritage of the prestigious Cheval Blanc Courchevel ski resort and glamorous Bvlgari hotels, LVMH is no stranger to the luxury hotel industry and, with the acquisition Luxury hotelier Belmond, the luxury group is about to become one of the most influential hotel groups in the world.
Beyond the hotels, Belmond's portfolio of 46 luxury hotel brands also includes restaurants, trains and river cruises; but its most famous estates and brands include the Belmond Hotel Cipriani in Venice; Belmond Hotel Splendido in Portofino, Italy; and the Belmond Quat'Saison Manor in Oxford, England; In total, the group of luxury hotels has establishments all over the world, from Saint Petersburg to Russia and even the Americas, to the Copacabana Palace in Rio de Janeiro; and El Encanto in California.
Luxury Commerce: Why LVMH Acquired Belmond Instead of a Hotelier
Spending $ 3.2 billion on Belmond is not the most expensive acquisition of the LVMH group. the French luxury conglomerate spent 6.5 billion euros last year to finalize its stake in Christian Dior and in 2011, 4 years ago, 4.3 billion euros for the first time. purchase of jeweler-watchmaker Bvlgari.
"Does a company really want to be active in the fields of hotel real estate, hotel management, hotel brands, trains, river cruises and restaurants? The most likely scenario is that a private equity fund buys Belmond, cleans and reduces expenses, and then sells shares of the company. "- Bjorn Hanson at Travel Weekly
According to hospitality consultant Bjorn Hanson, the size of Belmond's properties and companies made it an unlikely acquisition for existing specialty hotel groups. Recently, Belmond, also the owner of the renowned Orient Express rail assets, had not only experienced financial difficulties, but also a series of natural disasters that have worsened its revenues, including hurricane-related closures on its Caribbean properties Belmond Cap Juluca and Belmond La Samanna in 2017 and the 21 Club damaged by water, earlier in 2018.
Yet, despite Belmond's woes, the luxury hotelier still possessed highly sought-after luxury real estate – with a limited natural offering due to their exclusive locations and unique architectural wonders that simply can not to be reproduced.
According to Reuters, for $ 25.00 per Class A share, LVMH pays a 42% premium to Belmond who is currently trading for $ 17.65 on the New York Stock Exchange before the announcement. The acquisition of Belmond for $ 3.2 billion includes the net book value of these shares at $ 2.6 billion, as well as the value of the company, which includes debt and preferred shares. Belmond shares jumped 40% in New York to $ 24.74 after the announcement.
With a reported profit of $ 140 million before interest, taxes, depreciation and amortization (EBITDA) on a turnover of $ 572 million, LVMH pays 19 times the expected EBITDA of Belmond for 2019. LVMH and Belmond issued a statement indicating that this transaction was expected to be completed in the first half of 2019, subject to the approval of Belmond shareholders and European competition regulators.
Analysts believe that extending LVMH's portfolio to luxury hosting services could serve as a bulwark for the incoherent demand for luxury goods from mainland China, in addition to the threat of trade war between its two bigger markets. By acquiring Belmond, LVMH is now able to offer consumers a holistic luxury experience.