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Home Inns closes in on Shanghai Motel

  • Tim Burroughs
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Home Inns & Hotels Management, China’s largest budget hotel chain, has emerged as the front runner to purchase Shanghai Motel Management from a consortium of investors led by Morgan Stanley. The cash-and-stock deal is slated to be worth around $500 million, half the amount forecast when the company was put up for sale in February, according to the Wall Street Journal.

Shanghai Motel Management, which owns the Motel 168 chain, is China's fifth-largest motel chain by number of rooms. Morgan Stanley bought a 20% stake in the company for $20 million in 2006 via one of its real-estate funds. Two subsequent investments took the fund's holding to 59%, with the remainder owned by multiple shareholders, including another Chinese hotelier.

Several US-listed Chinese hotel chains were said to be working with PE players on bids for Shanghai Motel Management. Purported partnerships included China Lodging Group and Bain Capital, CDH Investments and General Atlantic, as well as 7 Days Group Holdings, Home Inns, the Carlyle Group and Warburg Pincus.

It was hoped that the sale would raise up to $1 billion but shares in Chinese budget hotel chains have struggled this year over concerns about a supply glut in the market combined with falling visitor traffic.

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