Carlyle, Sequoia in take-private bid for Chinese budget hotel chain

The group has offered to acquire all outstanding shares that it doesn't already own for $4.23 per ordinary share and $12.7 per American Depositary Share (ADS). The ADS offer price represents a 20% premium to Tuesday's close.

In 2008, Actis China and Warburg Pincus Asia invested $65 million for an undisclosed stake in 7 Days. Warburg also put in $25 million in 2006 and 2007. As of March 31, Actis and Warburg own 11.6% and 16% in 7 Days, respectively, while co-chairmen He and Zheng together hold 32.7%.

7 Days, which operates limited service budget hotels across major cities in China, has recorded double-digit revenue growth every quarter for the past two years. The company said in a regulatory filing that it will form a special committee consisting of independent directors to consider the take-private proposal.

Carlyle, which is also part of another consortium that has made a $3.5 billion take-private offer for US-listed Focus Media, has been active in China's hotel sector. In July, the US private equity giant acquired a controlling stake of 49% in Mandarin Hotel Holdings, which manages a mid-market hotel chain in China under the Crystal Orange Hotel and Orange Hotel brands.

In November 2007, it also invested in Zhejiang Kaiyuan Hotel Management, a Hanghzou-based hotel operator with around 70 properties in Beijing, Shanghai, Hangzhou, Chengdu and Kunming. The company was reportedly planning an IPO last autumn but nothing materialized.

Private equity firms have a strong track record when it comes to backing hotel companies in China. VC players including IDG Ventures and Sycamore Ventures were early investors in Home Inns while IDG also participated in funding for China Lodging Group, alongside Chengwei Ventures and Northern Light Venture Capital. Both firms are now NASDAQ listed.

Last year Morgan Stanley exited its majority stake in Shanghai Motel Management as part of a $469.5 million buyout by Home Inns.

 

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• Topics
• Greater China
• Buyouts
• Exits
• China
• buyout
• The Carlyle Group
• Warburg Pincus Asia
• Actis Capital
• Sequoia Capital