JK Hotels going to the region this year

With an offer to acquire the Confifi Hotels in the bag, blue chip John Keels Holdings (JKH) plans to expand its hotels to India in coming months, according to a top company official.

“Within this financial year (ending March 2008), we will go to India,” Jayantissa Kehelpannala, Director JKH Hotels told The Sunday Times FT. He said the company is scouting for good properties in the region and their global strategy on the hotel sector continues to gain ground.

Ajit D. Gunewardene, Deputy Chairman, JKH said that the company is closing in on a property in India. “India is a complex market and land prices are high. We have a separate team handling the company’s Indian expansion separately,” he said. He added that presently the company is evaluating seven to eight projects in the region. “Some are in South Asia and some are further out,” he said.

He said that under a new deal between John Keells Hotels PLC (KHL) and the Confifi Group, KHL has announced voluntary offers to acquire 100 percent of the issued shares of each of the three listed hotel companies operated under the Confifi Group, namely, Riverina Hotels PLC (Riverina), Eden Hotel Lanka PLC (Eden) and Confifi Hotel Holdings PLC (Confifi – owning company of Palm Gardens Hotel).

The acquisitions would be in the form of a share swap whereby KHL would issue its own shares as consideration, where five shares of KHL for every one share held in Riverina, five shares of KHL for every three shares held in Eden and 11 shares of KHL for every one share held in Confifi will be the swap ratios.

Gunewardene said that the company will be making an offer for roughly 174 million shares, adding that it will be of approximately Rs.1.39 billion worth.

He said this acquisition would complement KHL’s existing portfolio of hotels. “”On the Bentota and Beruwala coastline we only have one hotel, which is the Bentota Beach Hotel. This transaction will strengthen our position on the southern coastal belt and in terms of the Sri Lankan portfolio this really completes it,” he said.

Kehelpannala added that the Sri Lankan hotel sector performance is slowly emerging from its glum situation for the winter season.

“The trends are improving, which is mostly the booking patterns. With the statistics we have so far on the booking patterns, we are confident of the winter season,” he noted.

He also pointed out that the industry is facing a ‘real problem’ due to a staff drain to the Middle East and the Maldives. “This is a significant problem. We see a lot of people leaving key positions. Presently the JKH has a succession planning programme in place, coupled with proper training to develop our existing staff and retain them,” he explained.

He agreed that out of their properties the Maldives resorts bring the majority of the profit to the hotel sector.

Confifi Chairman Prof. M.T.M. Furkhan said Confifi Management Services Ltd (CMS) has agreed in principle to accept the voluntary offers made by KHL in respect of all shares held by CMS in Riverina, Eden and Confifi at the respective swap ratios. He said that he has been in the industry for 37 years, but now it is the time to move on. “We built Confifi Hotel in 1970 and I have been in the industry managing this company for 37 years. Both my children are in Australia and I am getting on in years,” he said.

He said it is a good deal because the two entities are swapping shares.

The Boards of Riverina, Eden and Confifi agreeing to terminate the existing management contracts with Confifi Management Services Limited (CMS) without compensation, and appoint Keells Hotel Management Services Limited as managing agent, to become effective from the date of the three voluntary offers being declared unconditional as to acceptance by KHL.

Prof. Furkhan said that KHL has also offered to purchase the land in Beruwela owned by Confifi Beach Hotel (CBH) for Rs. 148.4 million subject to title clearance, based on a valuation by Chartered Valuation Surveyor, P.B. Kalugalagedera in a report dated 31 January 2006.

He said that KHL has a very strong image both here and in the Maldives and this will boost the appearance of the Confifi Hotels’, which is the strongest on the southern beachfront. “We are in agreement with them to use the ‘Confifi’ name for two years, after which it will revert back to us,” he said.