China's Huazhu to buy German luxury hotel group Steigenberger

Frankfurt

CHINA'S Huazhu Group is buying the Steigenberger hotels as it seeks to extend its global reach with the addition of one of Germany's most well-known upmarket chains.

Huazhu, already the world's fifth-largest hotel group by market capitalisation, is paying 700 million euros (S$1.05 billion) in cash for Steigenberger parent Deutsche Hospitality.

That values Deutsche Hospitality, whose brands include MAXX by Steigenberger, Jaz in the City, IntercityHotels and Zleep, at 17-18 times its 2019 expected earnings before interest, tax, depreciation and amortisation or at less than 10 times expected 2022 core earnings.

Peers such as Marriott, Hilton, Accor , InterContinental and Hyatt trade at 11 to 14 times their expected core earnings over the next 12 months, while China International Travel and smaller peer Huazhu both trade at more than 20 times.

Huazhu, based in China and listed in New York, operates hotels using a franchise model and on leased properties. The acquisition will add to its more than 5,000 hotels.

Deutsche Hospitality operates 118 hotels and has 36 hotels under development, with a focus on Europe. It has plans to increase that number to 250 by 2024.

"With the help of Huazhu, that will be achieved earlier than 2024," said Huazhu chief executive Jenny Zhang, adding that four of five Deutsche Hospitality brands will be rolled out in China.

No job cuts are planned as part of the deal, she said, adding that Huazhu does not expect to encounter any issues with antitrust regulators or German authorities overseeing foreign investments in the country.

Huazhu is buying Deutsche Hospitality from Egyptian tourism entrepreneur Hamed El Chiaty, who bought the group from the Steigenberger family in 2009. Mr El Chiaty will stay invested in a Middle-East joint venture. REUTERS