Others News
- Home Inns to buy economy hotel chain
Date: 25-Oct-2007 Sources: (Shenzhen Daily)
HOME Inns & Hotels Management Inc., China's biggest budget hotel operator, said Tuesday that it would pay 340 million yuan (US$45 million), including assumption of debt, to buy Top Star, a domestic two-year-old chain with 26 economy hotels.
After the acquisition, to be completed this year, Home Inns will operate 320 hotels in 80 domestic cities.
'We are solidifying our leadership position,'said Home Inns chief executive officer David Sun.
'In addition, we are demonstrating our ability to grow rapidly through acquisition as well as organically,'Sun said.
In July, the company said it planned to quadruple its number of hotels to 1,000 in a few years, with acquisitions accounting for one-fifth of its expansion in the long term.
Home Inns will assume 172 million yuan of Top Star's debt, pay up to 88 million yuan in cash and sell as many as 655,831 additional ordinary shares to fund the purchase.
Analysts expect to see more consolidation in the country's economy hotel industry, which ballooned to 100,000 rooms in 2006 from almost none in 2001, spurred by rising demand from small businesses and families on holiday.
Rosy market prospects have lured overseas investors such as Warburg Pincus, venture capital firm IDG, which invested in Home Inns, and Morgan Stanley, which invested in Motel168.
Blind investment and mismanagement have led to deteriorating service and price wars in some areas.
The government has started drafting rules to tighten controls on the economy hotel sector by raising the bar for new entrants, which is expected to benefit big players such as Home Inns and Jinjiang Inn.
China's top 10 budget hotel brands already control 64 percent of a market crowded with more than 100 players.
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