GTIS Partners has completed its public-to-private takeover of Brazil Hospitality Group (BHG), Brazil’s largest hotel owner. GTIS, along with GP Investments, an alternative investments firm in Latin America, have completed a $400 million tender offer, which the parties launched last August, for shares in BHG.
GTIS will now own a 70 percent stake in the hotel company, which now has been delisted from Novo Mercado, part of the Brazilian stock exchange BM&FBovespa. The deal, which was the largest in GTIS’ history, was made on behalf of GTIS Brazil Real Estate Fund II, which raised $810 million in 2012. GP Investments, which had been the parent company of BHG, will own the remaining shares.
The two parties together will own and operate 52 hotels comprising 10,000 rooms, primarily in Sao Paulo and Rio de Janeiro’s oceanfront. BHG’s existing development pipeline is expected to increase its portfolio by an additional 4,000 rooms with the next 24 months.
“The take-private of BHG is an example of the current market opportunity in Brazil,” said Tom Shapiro, president and chief investment officer of GTIS Partners, in a statement. “By taking advantage of the capital markets’ dislocation, we can acquire high-quality assets at cyclically low prices at substantial discounts to replacement cost. We are thrilled to partner with GP Investments, one of the most experienced and respected private equity investors in Brazil, on this deal.” According to GTIS, the BHG transaction represented a 50 percent discount to the replacement cost of the company’s real estate assets.
Current market conditions are favorable to public-to-private takeovers in Brazil, added Josh Pristaw, senior managing director at GTIS. “Dislocation in the public capital markets is creating compelling opportunities where companies are trading at a discount to their underlying asset values,” he said. “However, many public real estate companies have existing controlling shareholders that are either families or local institutions that limit the number of public companies that are available for investors that want and need control.”
“We have spent the last seven years building a platform of high quality assets in premium locations, creating from scratch one of the largest hotel companies in the country,” said Antonio Bonchristiano, chief executive of GP Investments. “Now it is time to focus on improving the quality of the product and services with a robust renovation plan and repositioning of selected hotels.”
GTIS has been actively investing in Brazilian real estate since its formation in 2005 and is one of the largest foreign real estate investors in the Latin American country. To date, the firm has deployed approximately $2 billion of equity across 40 investments in Brazil. GP Investments, founded in 1993, was the first private equity firm in Brazil and has invested in more than 50 companies in a wide range of sectors.