European vacation

Competition heats up for UK hotel, liquor and fitness company De Vere Group as interest in European hotels continues to grow.

Much like the hospitality market in the US, the European hotel sector is heating up. More participants are chasing fewer deals—making it a great time to be a hotel owner.

The latest case in point: Hotel and leisure company De Vere Group tentatively agreed to be acquired for £745 million (€1.1 billion; $1.4 billion) by Alternative Hotel Group Venice (AHG), a vehicle controlled by property maven Richard Balfour-Lynn and backed by a subsidiary of the Bank of Scotland.

But one would-be suitor could kick off a bidding war. Pan-European private equity firm Permira, led by Damon Buffini, also made a bid for the company, which was reportedly rejected on the grounds that it had too many preconditions.

A source close to Permira said the private equity firm was in open dialogue with De Vere's management and it would decide whether to bid soon. In a statement, Permira confirmed that it had been “considering whether to make an offer” for De Vere Group and urged shareholders to take no action in respect of the offer from AHG while it considered its position.

This is not the first time Permira has been interested in the company. It is believed to have made an informal offer of 600p a share two years ago. It renewed its interest in March when De Vere received an approach from NH Hoteles, a Spanish company.

De Vere has 19 four- and five-star hotels throughout England, Scotland and Jersey, some of which include golf, spa and conference facilities. With an eye towards expanding into Europe, the group has also inked a deal to manage a golf resort in Murcia, Spain, set to be completed in 2008. De Vere also owns the health and fitness centre chain Greens. And much like the heralded Taittinger deal last year, De Vere Group has an alcohol-related business line—its G&J Greenall distills white spirits like vodka and gin, including the manufacture of liquor for Bombay Sapphire and Bombay Gin.

The interest in European hotels was further illustrated by the blue-chip names reportedly eyeing the De Vere portfolio. Besides Permira, AHG and NH Hoteles, US private equity real estate group Starwood Capital and James Ritblat's property investment firm Delancey also showed interest in the portfolio. According to Jones Lang LaSalle Hotels, there were more than $20.6 billion in European hotel deals completed last year.