Holiday Inn 2005 Annual Report Download - page 5

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SIGNIFICANT DEVELOPMENTS
Britvic Initial Public Offering
In December 2005, IHG disposed of all of its interests in the Britvic
Group (Britvic), by way of an initial public offering (IPO) of Britvic
plc. IHG received approximately £371m in proceeds and additional
dividends, before transaction costs. The disposal of Britvic leaves
the Group focused solely on the hotel business. The results of
Britvic up to 14 December 2005 are included in the Group results.
Hotel Disposals
During 2005, IHG made significant further progress in its asset
disposal programme, including:
• the sale of 13 hotels in the US, Canada and Puerto Rico to
Hospitality Properties Trust (HPT) for $425m before transaction
costs. Completion of the sale on 12 hotels was on 16 February
2005, with the sale of the InterContinental Hotel in Austin, Texas
completing on 1 June 2005. IHG entered into a management
contract with HPT on 12 of the hotels and operates the
InterContinental San Juan on a lease agreement;
• the acquisition by Strategic Hotels Capital, Inc. (SHC) of an
85% interest in the InterContinental Miami and InterContinental
Chicago, for $287m in cash before transaction costs. The
acquisition completed on 1 April 2005 and IHG entered into
a management agreement with SHC on both of the hotels;
• the sale of 73 hotels in the UK to LRG Acquisition Limited (LRG),
a consortium comprising Lehman Brothers Real Estate Partners,
GIC Real Estate and Realstar Asset Management. The transaction
completed on 24 May 2005, with IHG receiving an initial £960m in
cash before transaction costs with a further £40m to be received
subject to meeting performance targets over the next three years.
IHG entered into a management agreement with LRG on 63 of the
hotels and operates the other ten hotels under a temporary
management agreement;
• the sale of nine hotels in Australia and New Zealand to Eureka
Funds Management Ltd (Eureka) for A$390m in cash before
transaction costs, and the sale of the Holiday Inn, Suva, to a
subsidiary of Fiji National Provident Fund (FNPF) for A$15m in
cash. Both transactions completed by 31 October 2005, with IHG
entering into management agreements with Eureka and FNPF
on these hotels;
• the sale of the InterContinental Hotel Paris for €315m.
The transaction completed on 1 November 2005 and the hotel
left the IHG system; and
• the sale of a further 13 hotels for proceeds of approximately
£159m.
Since the end of 2005, the Group has made further announcements
in relation to hotel disposals:
• on 25 January 2006, the sale to HPT of two hotels in the Americas
for $35m, marginally below net book value; and
• on 31 January 2006, the Group announced that it had placed a
further 31 hotels in Europe on the market. The book value of
these hotels is approximately £600m, and constitutes the final
tranche of hotels that the Group had previously announced it
would sell.
The asset disposal programme which commenced in 2003 has
significantly reduced the capital intensity of the Group whilst
largely retaining the hotels in the system via management and
franchise agreement.
Since the separation of Six Continents PLC in April 2003 (Separation),
the Group has sold or announced the sale of 144 hotels for
aggregate proceeds of approximately £2.3bn (see figure 3). Of these
144 hotels, 126 have remained in the system under Group brands
through either franchise or management agreements.
FelCor Relationship
On 25 January 2006, the Group announced a restructured
management agreement with FelCor Lodging Trust Inc., (FelCor),
covering all of the hotels (15,790 rooms) owned by FelCor and
managed by the Group. Seventeen hotels (6,301 rooms) will be
retained by FelCor and managed by the Group, with revised
contract terms (duration extended to 2025) and rebased incentive
fees on all the hotels. HPT have purchased seven of the hotels
(2,072 rooms) from FelCor for $160m, retaining the Group flag on
these assets. There is no increase in the guarantees to HPT as a
result of this deal. Nine further hotels (2,463 rooms) can be sold
by FelCor, retaining a Group brand. FelCor has the right to sell or
convert a further 15 hotels (4,954 rooms); these may retain the
Group flag.
Since the year end, the Group has sold its entire shareholding
in FelCor for $191m in cash.
InterContinental Hotels Group 2005 3