PRIVATE-EQUITY FOUNDERS FINALLY SELL OUT OF MANTRA

Written on the 9 September 2015 by Nick Nichols

PRIVATE-EQUITY FOUNDERS FINALLY SELL OUT OF MANTRA

MANTRA Group's (ASX:MTR) major shareholders have sold their entire holding in the accommodation group for $277.83 million, marking a major milestone in the evolution of the company.

EV Hospitality, which is controlled by CVC Capital Partners, and UBS Australia Holdings sold 81 million shares in Mantra at $3.43 each after cashing in a quarter of their holding in April for $91 million.

Mantra says it was informed this morning by the shareholders that the sale had been completed, noting that the sale was 'well supported by both existing and new high quality shareholders'.

CEO Bob East says the sale will allow 'a greater free float of Mantra Group shares'.

"A significant portion was untradeable until now so it opens up new investor opportunities," he says. 

"It is also a symbolic milestone that represents the end to what was, at first, an equity partnership prior to our ASX listing, then a shareholder relationship with both parties."

The sale was not unexpected after the remaining shares were released from escrow after Mantra announced its full-year result on August 27.

The selldown effectively began in June last year when CVC and UBS finally launched a public offering for the company and floated it on the ASX.

The partners received $239 million from the proceeds of the IPO, marking a belated exit of their holding which was acquired in 2008 from administrators to the failed Gold Coast financial services group MFS Ltd.

The private equity investors had anticipated selling out of their investment as early as 2010, although those plans were stymied by difficult post-GFC market conditions that prevailed at the time.

It's not clear whether the founding shareholders have booked an overall profit from the deal, with their initial investment in the then Stella Group comprising $409 million in cash and the assumption of about $900 million in debt.

However, CVC, which still refers to the assets as the Stella investment, has created two strong businesses from the initial acquisition Mantra Group and Helloworld, which comprises Stella's former global travel agency network.

Based on the raw figures from the Mantra investment, CVC and UBS have earned $608 million from the sale of Mantra Group, without accounting for dividend payments along the way, while still retaining Helloworld.

The final exit from Mantra has come as the shares in Australia's second-largest accommodation group last week were included in the ASX 200 for the first time, feeding into demand from institutional investors for index portfolios.

East says Mantra's ASX 200 inclusion has been particularly positive.

"There is a huge sense of achievement felt right across our network," he says.

"For team members who started with us back in 2009 or before, the change in the company is palpable and they have been very much part of that transition.

"Mantra Group is a vastly different company now our brands are more recognised than ever; we have the capability of adding better quality properties to our portfolio; owners want to invest with us; guests want to stay with us; and we attract and retain talented staff.

"Where we are today is very much attributed to our team from executive level through to back of house and front line hotel staff; and the corporate office teams that back them up every day.

"They have been dedicated and passionate about the company and there is a real sense of camaraderie having been through this journey together. 

While the company's shares are trading off their record high of $4.15 reached in June, they are still well up on their $1.80 issue price a year ago.

Mantra shares are currently trading around $3.48.


Author: Nick Nichols

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