Sunday, August 10, 2008

Oman gets into the European hotel business.

In a nice deal, Oman’s State General Reserve Fund (owned by the Ministry of Finance and administered under the financial affairs and energy resources council) has bought half of an Irish company who own a chain of hotels.

To balance the numbers reported in the press though, with the private equity group Quinlan buying the chain last year for around 1.16 bln euros, yet it now being reported that Oman bough half for just 200mln euro... That must mean the hotel company is saddled with ~800mln euro in debt.

Quinlan have a history of buying such assets and then flicking a piece at a profit, recently making $100mln on a similar deal with the Saudi Prince Alwaleed bin Talal bin Adbulaziz al-Saud for the British Savoy hotel group a few years ago.

See more at Irish Times
and RTE Business.
Oman fund takes half of Jurys Inns
Thursday, 7 August 2008 12:04
An investment fund from Oman has bought a 50% interest in the budget hotels chain Jurys Inns. The announcement was made by property investment group Quinlan Private, which bought the business for €1.15 billion last year from the Jurys Doyle group.

Oman Investment Fund is the investment arm of the Sultanate of Oman. Its deputy CEO Hassan Al Nabhani said it was impressed with the quality of the business and its growth potential.
The timing on this investment should be good. Jury's are somewhat 'downmarket' hotels, and as the UK economy tanks they are actually seeing an increase in business as travellers opt for lower cost accomodation. Other potential buyers are strapped for ready cash right now, and Quinlan would have wanted to offload such a big piece. Plus the hotel group plan to expand into Eastern Europe, where Oman's diplomatic efforts will help grease the wheels.

The Sultanate's fund, established in 1980, holds a large proportion of Oman’s Sovereign wealth, and while results unfortunately aren't public the fund is widely estimated to hold around $6 bln and has been growing fast lately as oil funds pour in. Most of that will have been built up in just the last few years, as the cupboard was bare in 1998. The funds are not open to the public, and there is also no transparent explaination to average Omanis of either cash flows or the totality of investments. This is not unusual in GCC sovereign funds, naturally. Oman recently had to deny it was the purchaser of 2% of UBS in Dec last year, after market rumors that the buyer was Oman. (A good thing too - UBS' share price has since dropped by 50%!).

Getting rid of the money in an active sense can't be easy. Earlier this year for example it was announced that Oman will be getting into the real estate development market in of all places Minsk, in Belarus. (note the visit around that time of the Belarus President).

Oman's fund needs to invest abroad, to help get rid of the excess US dollars it's earning and avoid pumping the economy even more than the Government already is. In a fiscal sense this is true excess money, unlike some of the Asian funds (like China's) which while large is mainly offset by savings account liabilities to ordinary savers in the domestic currency.

Oman will want to make a diversified long term return, and presumably help somewhat Oman's economy. Thus, there are often bi-lateral investment deals, which doesn't help acheive a net transfer overseas.

I wonder if Omanis will be able to work in the Jury Hotels...? That would be a great bonus as long as it doesn't hurt the business...

Warith Al Kharusi, who leads the SGRF, has a great job. Getting to play with $6 bln jetting all over the world must be a lot of fun. I'm very jealous.


  1. Oh, now - it seems a bit harsh to call Jury's "downmarket"; I supposed compared with the Savoy (or the al Bustan!) they are, but I think they're generally marketing hotels that attract travelers looking for well-run smaller hotels. You're quite right, though, that they're likely to do better as budgets tighten.

    But really, it's not like the Sultanate's invested in a chain of flophouses!

  2. Muscato,

    I didn't mean to diss Jury's as flophouses. I guess it does depend on ones definition of downmarket! I am clearly far too spoilt these days.

    To be true, I've always been a follower of old Winston's approach:

    'I am easily satisfied with the very best'...


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