Contract Amendment

RNS Number : 9659E

Park Plaza Hotels Limited

14 April 2011

 



                                                           14 April 2011

Park Plaza Hotels Limited

("Park Plaza" or the "Company")

Contract for the construction of the Park Plaza Westminster Bridge London

In June 2005, Euro Sea Hotels N.V. ("Euro Sea") (which at that time was a member of the Red Sea group of companies, in which Mr. Eli Papouchado, the Chairman of Park Plaza, and members of his family are interested) acquired a 33.3% interest in Marlbray Limited ("Marlbray"), the owner of the freehold of the site on which the Park Plaza Westminster Bridge London (the Hotel) is now located. In October 2005, Park Plaza Hotels Europe B.V. (which, along with Euro Sea, became a subsidiary of the Company on its IPO in July 2007) entered into an agreement with Marlbray to operate the Hotel (when built). In April 2007, Marlbray entered into a contract (the "Building Contract") for the construction and fit-out of the Hotel with WW Gear Construction Limited ("Gear"), a wholly-owned member of the Red Sea group. At that time, the Hotel was intended to comprise 953 units.

On 20 February 2008, Euro Sea acquired all the issued share capital of Marlbray that it did not already own. On the same date Marlbray and Gear agreed to an amendment of the Building Contract to take account of the fact that planning permission had been obtained for an additional floor, which increased the size of the Hotel from 953 units to 1,037 units and regulate the terms of an early completion bonus payable to Gear (the "First Amendment"). The additional amount for the additional floor payable to Gear under the amended contract was £9.0 million. The eventual value of the Building Contract, excluding the bonus payment referred to below, was £139.75 million.  

The Building Contract (as amended) had provided that if practical completion of the Hotel occurred prior to 31 March 2011, Gear would be entitled to a bonus of £15,000 for each day prior to 31 March 2011 that practical completion took place. In March 2010, in order to permit Marlbray to take partial occupation (in stages) of the Hotel and thus proceed to soft opening and operation of the Hotel prior to full practical completion of the Hotel (which only occurred in September 2010), the parties agreed to vary the bonus arrangement so that the bonus was calculated by reference to when each floor was handed over to Marlbray rather than by reference to completion of the whole of the Hotel (the "Second Amendment").

As a result of this variation, an early completion bonus of £6.07 million is due to Gear. Under the terms of the Building Contract (prior to the Second Amendment), the bonus payable to Gear would have been £2.73 million. Although the bonus element of the Building Contract price increased, Marlbray benefited significantly in that it was able in March 2010 to open the Hotel partially at least 6 months earlier than would otherwise have been the case. For the period from 1 April to 30 September 2010 (when the Hotel opened fully), it is estimated that the Hotel contributed £6.27 million of EBITDA to the Park Plaza group.

The amendment of the Building Contract in 2008 to allow for the construction of the additional floor and the variation of the bonus arrangements in 2010 constituted related party transactions under AIM Rule 13, because Mr. Papouchado and members of his family are interested in Gear and Mr. Ivesha (the Company's CEO) is treated, for the purposes of the City Code on Takeovers and Mergers, as acting in concert with interests associated with Mr. Papouchado in the Company.

The Directors of Park Plaza, with the exception of Mr. Papouchado and Mr. Ivesha, having consulted with the Company's nominated adviser, Investec Bank plc, consider that the terms of the amendments of the Building Contract in 2008 and 2010 and the variation of the bonus arrangements described in this announcement were fair and reasonable insofar as Park Plaza shareholders are concerned.

Contacts:

Park Plaza Hotels Limited	[phone]
Chen Moravsky, Chief Financial Officer
Hudson Sandler	[phone]
Wendy Baker / Kate Hough
Investec Bank plc	[phone]
James Grace

Notes to Editors

About Park Plaza:

Park Plaza Hotels Limited is owner, operator, developer and franchisor of hotels in Europe, the Middle East and Africa.  The majority of the Group's hotels operate under the Park Plaza Hotels & Resorts brand (part of Carlson Hotels Worldwide), over which the Group has exclusive rights in 56 countries in EMEA, or art'otel, a brand which the Company fully owns. 

Through its strategic partnership with Carlson, one of the world's largest travel and hospitality companies, Park Plaza has access to Carlson's powerful reservation and distribution system, airline partnerships with 20 airlines, loyalty programmes such as Club CarlsonSM for guests and look to book® for travel agents and cross-selling opportunities. 

The Group currently has 25 Park Plaza hotels and art'otels, with over 5,447 rooms in operation. New projects under development include Park Plaza Nuremberg (2012), art'otel amsterdam (2012), a 60-room extension of art'otel berlin city center west (2012) and art'otel london hoxton (2013).

Park Plaza also part owns Arenaturist, one of Croatia's leading hospitality companies, and operates 8 hotels and 5 apartment complexes (with a total of over 2,869 rooms) and 7 campsites in three resorts in Pula and Medulin.

Park Plaza's shares are admitted to trading on AIM, a market operated by the London Stock Exchange.

Euro Plaza Holdings B.V. (a company ultimately controlled by Mr. Eli Papouchado, the Company's Chairman, acting in his capacity as trustee of an endowment established for the benefit of members of his family) and Molteno Limited (in which Mr. Boris Ivesha, the Company's CEO, is interested) are deemed to be acting in concert for the purposes of Rule 9 of the City Code on Takeovers and Mergers (the Code). Together they hold more than 50% of Park Plaza voting rights and (for so long as they continue to be treated as acting in concert) may accordingly increase their aggregate interests in shares without incurring any obligation under Rule 9 to make a general offer, although individual members of the concert party will not be able to increase their percentage interest in shares through or between a Rule 9 threshold without Takeover Panel consent.

Our Brands:	Our Company:
www.parkplaza.com	www.parkplazahotels.net
www.artotels.com
www.arenaturist.com

For images and logos visit www.vfmii.com/parkplaza

 

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