Boston, MA 09/22/2014 (wallstreetpr) – Hyatt Hotels Corporation (NYSE:H) agreed to sell 38 of its hotels to Lone Star (Purchaser) for ~$590 million through a franchise agreement. The portfolio of 38 hotels includes Hyatt House and Hyatt Place and comprises of 4,950 rooms.
As per the agreement, Aimbridge Hospitality, LLC will manage the Hyatt portfolio for the Purchaser, but, all the hotels will continue to remain the existing brands. The Purchaser will spends additional ~$50 million as capital expenditure across the portfolio for next two years. The Company continues to market six additional select services hotels.
Hyatt expects that the transaction will complete by November 2014, which is subject to certain approvals and customary conditions.
Rationale
Hyatt’s Global Head, Strategy, Steve Haggerty said that the Company utilized its industry expertise and strong capital to build the brands like Hyatt Place and Hyatt House.
The leading global hospitality company is leveraging its long-term brand presence, which comprises of 563 properties including ten brands across 48 countries. Now the Company focuses on recovering the capital while maintaining its presence across multiple markets.
Hyatt Hotels Corporation (NYSE:H) selected the franchise methods to offer the services in the emerging markets at low price and primarily target the markets like India, China and the Middle East.
The Hyatt Hotels Corporation (NYSE:H) believes that the renovation plan will rebuild the brand reputation in the hospitality industry and strengthening the relationship with Lone Star (Purchaser) and Aimbridge.
So, the room portfolio mix will change after the agreement with Lone Star. The franchise segment will increase from its 21% (31,245) as of June 30, 2014 to 24% (36,195) of total rooms.
Final take
Hyatt Hotels Corporation (NYSE:H) has multiple earning tools such as owned, leased and franchise based properties that provide long-term growth opportunities. Moreover, the latest deal with Lone Star and Aimbridge and strong balance sheet will further enhance the Company’s earnings composition.
