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Largest shareholder plans takeover of Action Hotels, shares explode

Staff Writer |
Shares in Action Hotels rose Friday as the company said its largest shareholder, Action Group Holdings Co KSCC, has made an offer for the rest of the issued shares of the company as it posted increased annual revenue.

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Action Group's offer for the rest of the company's shares comprises of a cash consideration of 24 pence per share. Action Group currently owns 72% of Action Hotels.

In due course, Action Group would seek the cancellation of Action Hotels shares on AIM. The Middle Eastern hotel developer shares were trading up 34% Friday morning at 21.51p each.

The offer of 24p per share represents a 50% premium to the 16.0p closing price on Thursday.

In a separate announcement, the company said its pretax loss widened in 2017 to $14.1 million from $6.3 million. Action Hotels increased its revenue 10% to $58.3 million from $53.1 million.

The increased loss was "primarily driven" by the impact of pre-opening, financing costs, and depreciation of new hotels.

The increase in revenue came from additional income coming from its new hotel rooms and a full year contribution from its 2016 hotels in Brisbane, Ras al Khaimah and Sohar.

Action Hotels is proposing a final and full year dividend of 0.77p per share, down from 2.26p last year. The company said it is to focus investing cash resources for completion of projects rather than paying dividends.

The company expects its borrowings to rise and it is"exploring additional sources of financing to "support and maintain" its growth.

Despite its debt levels approaching their "peak" Action Hotels expects its debt burden to reduce. This is due to its build programme continuing to reduce, with only two hotels currently in its pipeline "which will alleviate cash requirements".

Action Hotels said its 2018 first quarter revenues are up 11% year-on-year. This is driven from new hotel rooms and strong performances compensating for the challenging conditions being experienced in its Middle East hotels.

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