The Goldman Sachs Group, Inc. (GS - Free Report) , Goldentree Asset Management LP and Avenue Capital Group LLC are set to jointly acquire 144 U.K. hotels that are already leased to their previously acquired company Travelodge Hotels Ltd – one of U.K.’s biggest budget hotel chains. The value of the deal has been struck at around £500 million ($830 million). The acquiring companies will have an equal one-third stake in the hotels.
Goldman, Goldentree and Avenue Capital took over Travelodge Hotels from Dubai International Capital in Aug 2012 as they bailed out the company through a debt-for-equity swap. This financial restructuring included writing off bank debt of £235 million and infusion of £75m of fresh capital.
The current owners of the portfolio of 144 hotels are Lloyds Banking Group plc (LYG - Free Report) , Prestbury Investment Holdings Ltd., West Coast Capital and Aldersgate Investments. The hotels are situated in London and southeast England.
Launched in the U.K. in 1985, Travelodge has grown from a mere roadside hotel chain to a major budget hotel chain in the nation. It now runs more than 500 hotels (nearly 37,000 rooms) in the U.K., Ireland and Spain.
The latest move comes in line with Travelodge’s initiatives to boost profitability through acquisition of properties and revamping buildings. Notably, the company has invested £57 million in the last 18 months for modernization of its hotels.
As the hotel sector in the U.K. is bouncing back after the recession, private-equity companies particularly those which are based in the U.S. are viewing this sector as a lucrative area to invest.
Currently, Goldman carries a Zacks Rank #2 (Buy). Some better-ranked stocks in the finance space include Select Bancorp, Inc. (SLCT - Free Report) and Piper Jaffray Companies . All these stocks sport a Zacks Rank #1 (Strong Buy).