The listing of Australia's second largest hotelier Mantra Group, billed as the largest hotel float in more than a decade, could win investor backing if its high-profile owners, private equity group CVC Asia Pacific and investment bank UBS, can convince institutions of the sector's growth potential.
Local investors have traditionally avoided investing in hotel groups because of their volatile income streams and exposure to shaky tourism markets. But Mantra is pitching itself as a group more focused on the corporate market with growth prospects in major capital cities, and even with an exposure to Asia.
It is understood that Mantra will look to pour some of the float proceeds -- it is looking to raise between $397 million and $446m -- into securing new hotel management contracts.
Mantra's portfolio already spans 111 properties and more than 11,400 rooms across Australia, New Zealand and Indonesia, and is second only to Accor locally.
The offer is being handled by joint lead managers UBS and Macquarie Capital, supported by Ord Minnett and Morgans Financial. The float offer price range has been set at between $2 to $2.60 a security, which would see the group have a market capitalisation of between $476m and $549m.
Mantra Group chief executive Bob East, who could not be reached for comment yesterday, and key executives are likely to retain a stake in the company.
At issue pricing, the company would sit on an enterprise value to forecast earnings ratio of between 10.3 times to 11.6 times. With the bookbuild set for March 25, some said the group probably received conditional support from cornerstone investors after a non-deal roadshow earlier this year.
CVC Asia Pacific paid $450m for Mantra, previously known as Stella and once part of the failed Gold Coast group MFS, which collapsed spectacularly in early 2008 with debts of $3 billion.
CVC attempted to sell Mantra two years ago, but the sale foundered when it could not agree on price with several private equity groups looking at it as well as a handful of international hotel companies hoping to bolster their strength in the Asia-Pacific.This time Mantra, which has restructured its debts and lifted earnings, is expected to succeed.
"I think the market is very different than 2012 and you are accessing professional investors who can't normally access these types of businesses," said one Mantra executive connected with the IPO, speaking on condition of anonymity.
"The initial feedback has been very encouraging, but no decision has been made as to whether we will proceed."