Méridien expansion could pave the way to the stock market

The Le Méridien hotel chain could be floated on the stock market by new owner Nomura in four to five years' time, it has emerged.

Guy Hands, managing director of the Japanese investment bank's Principal Finance Group, is understood to want to increase the 150-strong chain of four- and five-star hotels by about 50 hotels, all of them leased, franchised or run under management contracts.

Once this had happened, the chain could be prepared for a stock market flotation.

Nomura bought Le Méridien from Forte Hotels last month for £1.9b and subsequently agreed a £1.25b sale-and-leaseback deal with the Royal Bank of Scotland (Caterer, 7 June, page 7).

That deal comprised six Le Méridien properties, the 895-bedroom London Cumberland hotel bought from Compass in March, and five hotels from Nomura's Principal Hotels portfolio.

Similar deals are likely to be struck to cover all Le Méridien's 38 owned properties. The rest of the chain consists of 77 hotels operated under management contracts, 13 franchised and 22 run under an alliance with Nikko Hotels.

At the time of the acquisition Nomura said it planned to merge Le Méridien with Principal Hotels as a way of improving the performance of both chains.

"It is all possible, but it is always hard to forecast five years ahead," said one industry source.

"What it means is that, at the very minimum, Nomura will be committed to the management of the chain for at least five years, which is a good thing. The logic seems to be impeccable," said another in the City. "It is a classic venture-capital play."

by Nic Paton