Hotel group Jarvis is the latest in a growing list of companies to have made the jump from a publicly listed to a privately owned company. Macdonald and Hanover International both made the move last year. But just what are the reasons for this growing trend, and why is it happening now?
A key factor is the plethora of crises that have hit the industry - the 11 September attacks in 2001, the war in Iraq, Sars, suicide bombings in the Middle East - over the past three years. With fewer international tourists and plummeting trading levels leading to a decline in confidence in the sector and falling share prices, the London Stock Exchange has become a far from comfortable place to be.
For Jarvis, a key reason for going private is that it wants to take on more debt - something the group said it could not do in the public arena. Kayterm, the vehicle being used by Jarvis management to buy the group, said the company's share price had generally traded below its floatation price of 175p since joining the London Stock Exchange in 1996 and it had continued to decline in 2003, reaching a low of 86.5p in April. This led the board of Jarvis to review options for realising value for its shareholders, culminating in Kayterm's £159m offer for the hotel group.
Skye Leisure Ventures, the company formed by the Macdonald management team to take the group private, said it made the move because it believed Macdonald Hotels had been underrated by the market for a "considerable amount of time", making it difficult to use its stock market listing to develop the business.
While the economic downturn has been cited by analysts as the main reason for the exodus of hotel companies from the stock market, there is also a great deal of private equity and venture capital in the market at the moment, making going private an attractive opportunity for hotel businesses. With interest rates remaining low and an upturn widely anticipated, venture capitalists are happy to plough money into the sector as they are likely to get a decent return on their investment.
Leaving the public arena also gives companies the opportunity to earn decent profits for themselves, rather than for their shareholders.
More departures can be expected from the London Stock Exchange this year, with the smaller hospitality companies, who have suffered most from the downturn, and those that own a greater percentage of their properties the most likely candidates for the move to the private sector.
One obvious candidate is Queens Moat Houses, which is currently suspended from the Stock Exchange while the company holds talks with its bankers to sort out its complex debt repayment. Irish hotel group Gresham is another, following several recent approaches to buy the company (see left).
However, there are some hotel companies, such as Hilton and InterContinental, who because of their size will never leave the public domain, so while hotel groups on the London Stock Exchange may be a little sparse at the moment, it is unlikely they will ever disappear - they may even start reappearing in three to five years' time.