Orient-Express Hotels Ltd., owner of 47 deluxe leisure properties in 21 countries (39 of which it manages)…
Orient-Express Hotels Ltd., owner of 47 deluxe leisure properties in 21 countries (39 of which it manages), announced that it had entered into an agreement to acquire the Royal Scotsman luxury tourist train from the L&R Group. This acquisition brings to 6 railway tourist train operations within the company. The others are the Venice Simplon-Orient-Express in Europe, the British Pullman and Northern Belle in the U.K., the Eastern & Oriental Express in southeast Asia and the Hiram Bingham in Peru. The company`s train operations had an EBITDA of $4.6 million for the nine months ended September 30, 2004.
Orient-Express Hotels will take over 50% ownership of the Royal Scotsman from April, 2005 in time for the high season and the balance will be acquired on an earn-out basis at a multiple of 5.5 times EBITDA in three years. Management will remain with L&R Group during the earn-out period, however, the product will be fully integrated into the Orient-Express Hotels sales and marketing network immediately. The initial 50% is being acquired for approx. $2.75 million (including assumption of 50% of debt) and the balance will depend on earnings.
The Royal Scotsman is the third acquisition made recently by Orient-Express Hotels on an earn-out basis. Pansea Hotels in southeast Asia was the first, concluded in February, 2004 where the earn-out is based on 8 times EBITDA, followed by Afloat in France in May, 2004 where the earn-out is based on 7 times EBITDA and now the Royal Scotsman with an earn-out based on 5.5 times EBITDA. All three of these businesses have excellent management in place and the delayed buy-out enables the properties to be fully integrated within Orient-Express Hotels and the shareholders to be highly motivated to improve profits before the buy-outs are consummated. The buy-out multiples are quite reasonable for leisure properties so both Orient-Express Hotels and the sellers are well rewarded.
Although the Royal Scotsman currently only operates a seasonal service largely within Scotland, Orient-Express Hotels expects to be able to add itineraries which will generate additional profits.
The Royal Scotsman is composed of 9 Edwardian style coaches which accommodate 36 passengers. Each compartment has a private bathroom. The train spends each night stationary at a remote siding in the beautiful countryside of Scotland. When not underway in daytime, a luxury bus which accompanies the train takes guests to visit castles, clan chieftains, Scotch whiskey distilleries, historic battlegrounds and other points of interest in the Lowlands and Highlands. Guests enjoy excellent cuisine and wines, accompanied as customary with a dram of whiskey. They visit the great estates of Scotland and meet the owners. A closer understanding of the unique Scottish culture through its people, along with seeing the spectacular scenery are among the benefits of the journey. The train currently operates from April through October.
The Royal Scotsman will be Orient-Express Hotels` third tourist train in the United Kingdom. The British Pullman, consisting of beautifully-restored parlor cars of the 1920s and 1930s, operates in the south of England in association with the Venice Simplon-Orient-Express continental train. The Northern Belle composed of post World War II first class parlor cars in the theme of the great estates of the north of England, operates north of London. The Royal Scotsman is an obvious complement to these two other trains.
The Royal Scotsman has been in operation since 1985 and was the creation of Michael Ryan and Fergus Hobbs who are the sellers.
Simon Sherwood, President, said Our tourist train and river cruise business has carved out a profitable market where we are among the few operators worldwide of truly luxury rail and inland waterway travel experiences. The Royal Scotsman is another jewel in that crown. It will be managed by our Tourist Train and Cruise Division headed by Nicholas Varian, Vice President – Trains and Cruises.
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