Creating a Global Luxury Hotel Chain

question 30

Essay

Creating a Global Luxury Hotel Chain

Fairmont Hotels & Resorts Inc. announced on January 30, 2006, that it had agreed to be acquired by Kingdom Hotels and Colony Capital in an all-cash transaction valued at $45 per share. The transaction is valued at $3.9 billion, including assumed debt. The purchase price represents a 28% premium over Fairmont's closing price on November 4, 2005, the last day of trading when Kingdom and Colony expressed interest in Fairmont. The combination of Fairmont and Kingdom will create a luxury global hotel chain with 120 hotels in 24 countries. Discounted cash-flow analyses, including estimated synergies and terminal value, value the firm at $43.10 per share. The net asset value of Fairmont's real estate is believed to be $46.70 per share.
-Assume the acquirer divests all of Fairmont's hotels and real estate properties but continues to manage the hotels and properties under long-term management contracts. How would you estimate the net present value of the acquisition of Fairmont to the acquirer? Explain your answer.

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Definitions:

Analgesics

Medications designed to relieve pain without causing the loss of consciousness, often over-the-counter or prescription drugs.

Intensive Care Unit

A specialized department in a hospital that provides comprehensive and continuous care for patients who are critically ill or require life support.

Painful Stimuli

External prompts or triggers that cause pain sensations, used in medical assessments to evaluate consciousness or neurological responses.

Pain Management

The process of providing medical care that reduces or eliminates the uncomfortable sensation caused by disease, injury, or surgery.