Promoters offer to buy China’s budget hotel chain 7 Days Group for $635 mn

A consortium led by the co-chairmen and founders of Chinese budget hotel chain 7 Days Group Holdings Ltd has offered to take it private in a deal valued at around $635 million.

The consortium comprising of 7 Days co-chairmen and founders Boquan He and Nanyan Zhen and private-equity firms Carlyle Group and Sequoia Capital, has offered to buy the shares that they do not already own for $4.23 each, or $12.7 per American depositary receipts (ADR) in cash. (Each ADR represents three ordinary shares).

The offer represents a premium of 20.2 per cent to the closing price of the company's ADRs on 25 September.

Boquan He holds about 23 per cent of the company's ordinary shares, and Nanyan Zheng holds 9.3 per cent, while New York-based private equity firm Warburg Pincus is the largest outside shareholder with a 16 per cent stake.

As per the terms of the offer, the consortium intends to form an acquisition vehicle and the transaction is expected to be financed by a combination of equity capital funded by the consortium members and third-party debt.
 
The board of 7 Days said it will form a special committee consisting of independent directors to consider this proposal.

Guangzhou-based 7 Days Group is the second-biggest budget hotel chain in China, which converts and operates limited service economy hotels across major metropolitan areas in the country under its `7 Days Inn' brand.

The company has 944 hotels in operation with 94,684 hotel rooms in 141 cities, and has a pipeline of additional 234 hotels with 22,485 hotel rooms under conversion.

The consortium said that the offer is not a binding offer, but a preliminary indication of interest and would be willing to table a firm offer after conducting due diligence and negotiation.