CVC takes controlling interest in Stella group

MFS Limited has sold a 65 per cent share in Stella Hospitality Group, which manages the Mantra Resort Ettalong Beach, to CVC Asia Pacific.

The transaction, which is not subject to shareholder approval, means MFS will receive just over $409 million and will keep a 35 per cent shareholding and an economic interest in Stella.

MFS will "equity account its interest in Stella following completion and will no longer consolidate approximately $905 million of Stella debt".

The transaction is subject to foreign regulatory approvals in Australia and New Zealand.

CVC has lodged applications with each of the regulatory bodies and stated it expects to receive approval "by the end of March".

Mr Rolf Krecklenberg will remain as managing director of Stella Group and will step down from the MFS board on completion of the transaction.

MFS is entitled to seek a priority allocation for its shareholders in any public listing of Stella should Stella seek a separate listing on a stock exchange in the future, according to MFS corporate communications officer Mr John Hurst.

He said the introduction of CVC as a majority shareholder in Stella would "significantly enhance its position to pursue expansion plans in Australia and internationally".

MFS chairman Mr Andrew Peacock said: "CVC is an excellent partner for Stella and one we believe can make a significant contribution to its future and maximise its value over the medium term.

"The proceeds from the transaction will enable MFS to repay its short term debt obligations and at the same time provide it with the flexibility to manage its commitments into the future.

"MFS will retain a 35 per cent interest in Stella so MFS shareholders will continue to benefit from Stella's expansion and growth."

CVC Asia Pacific managing director Mr Ben Keeble said that CVC was "delighted" to be taking a controlling interest in the Stella Group.

"Stella is a unique business in this market, led by a high quality management team.

"We look forward to working with Rolf Krecklenberg and his team to continue to grow the Stella brands in Australia and overseas for the benefit of all stakeholders in the company."

Mr Krecklenberg said: "CVC is an experienced investor with a shared vision for Stella.

"We look forward to working with CVC to continue Stella's development as a major player in hospitality and travel."

Mr Hurst said the CVC proposal was considered to be superior having regard to a number of factors including value, certainty, timing and ability to contribute to the future growth of Stella.

MFS has retained external advisers to assist it to undertake and complete a strategic review of its financial services business, including a review of its operating and financing structure.

Until the strategic review is completed, the board of MFS has asked the Australian Stock Exchange to continue the voluntary suspension of MFS securities.

Stella Group comprises the Peppers, Mantra and BreakFree brands in Australia and New Zealand, Protea Hotels and African Pride brands in Africa, and a 40 per cent strategic stake in Golden Tulip, the European based hotel company.

It also operates the largest integrated travel network in Australasia, with 3000 staff in 12 countries and 2100 retail and corporate outlets under banners including Harvey World Travel, Travelscene American Express, Holiday Shoppe, United Travel, Travelbag and Global in the UK.

CVC Capital Partners is a global private equity firm with over US$29 billion in funds focused on management buyouts.

CVC was founded in 1981 and today has a network of 18 offices throughout Europe, Asia and the United States.

Since 1981, CVC has completed over 250 investments across a wide range of industries and countries.

CVC Asia Pacific has been one of the most active private equity investors in the region and has completed 29 management buyouts, with an enterprise value of US$17.5 billion, covering Australia, Southeast Asia, Korea, Japan, China and Taiwan.

CVC's current Asia Pacific portfolio includes PBL Media, Australia's largest diversified media group; IMED, the largest diagnostic imaging center operator in Australia; Zhuhai Zhongfu Enterprise Company Limited; Amtek, Singapore's largest precision metal stamping company; GS Paper and Packaging, Malaysia's largest paper and packaging company; Plantation Timber Products: a leading manufacturer of wood fibre boards and laminated flooring in China; Magnachip: a leading semiconductor company in Korea, and Nien Made, the world's largest window shutter company.

Stock Reports, 4 Feb 2008 John Hurst, MFS Limited