Bill Gates makes $3.7bn bid for Four Seasons Hotels

Along with Saudi prince Alwaleed bin Talal, the Microsoft founder’s investment office, Cascade, has made an offer that values the Toronto-based hotel company at $3.7bn.

In yet the latest sign of private investor interest in the hospitality industry, Microsoft founder Bill Gates, Saudi prince Alwaleed bin Talal and Four Seasons chairman and chief executive officer Isadore Sharp have offered to take the luxury hotel operator private in a transaction that values the company at $3.7 billion (€2.9 billion).

According to a statement released by Four Seasons, the consortium’s offer of $82 per share represents a premium of 28.4 percent over the company’s closing share price on Friday, November 3. Included in the investor consortium are Triples Holdings Limited, Sharp’s family holding company and the controlling shareholder of Four Seasons; Kingdom Hotels International, a company owned by bin Talal; and Cascade Investment, a private investment entity owned by Gates. Under the terms of the deal, Triples would retain its investment in Four Seasons, giving it approximately 10 percent of the company post-acquisition; the remaining ownership stake would be held equally between Kingdom and Cascade.

“This transaction, with these investors, is the only one I am prepared to pursue,” Sharp said in a statement.

Management-led buyouts of large public companies have become increasingly popular in recent years as private equity and private equity real estate investors have raised a huge amount of capital. For example, sister publication Private Equity Real Estate estimates that approximately $50 billion will be raised by private equity real estate firms in 2006, a significant increase over 2005, which itself saw a record $37 billion raised worldwide.

This transaction, with these investors, is the only one I am prepared to pursue.

Isadore Sharp, chairman and CEO, Four Seasons Hotels

At the same time, management buyouts have come under scrutiny from public shareholder groups, who argue that such deals enrich management teams at the expense of the existing stockholders. In the Four Seasons transaction, Sharp may receive proceeds of approximately $288 million related to a long-term incentive agreement that was put in place in 1989. Sharp’s significant holdings in the company, as well as his operating role, may make it difficult for competing firms to launch a successful counter-bid. The board of Four Seasons has established a special committee to consider the offer and weigh potential options.

Four Seasons, one of the premier luxury brands in the industry, is one of the last remaining independent high-end hotel companies. In the past several years, private equity investors have acquired Fairmont Hotels & Resorts, The Savoy Group, Société du Louvre and Raffles, among many others.