Mantra prepares for $500m IPO: what happens when a franchise lists?
Tuesday, March 25, 2014/
Hotel franchise Mantra Group launched its initial bookbuild today ahead of a possible initial public offering announcement, which could occur within two days.
Macquarie Capital and UBS were calling for bids by close of business today, the Australian Financial Reviewreports.
The AFR reports a termsheet sent to investors showed Mantra Group was aiming to sell 171.1 million to 198.4 million shares at $2 to $2.60 a share. If achieved it would list in April with $476 million to $549 million in market capitalisation.
Mantra Group is owned by CVC Asia Pacific, while Mantra owns and runs various hotel and apartment chains including Mantra, Breakfree and Peppers.
The company operates with a franchise model, and it manages 117 properties and over 12,000 rooms across Australia, New Zealand and Indonesia.
It recently announced it had acquired the management and letting rights from Mint Hotel & Apartment properties in Melbourne and Brisbane, with the properties adding 799 rooms to its portfolio.
It also signed for the development of a number of new properties including a $25 million hotel in Perth, as well as projects in Melbourne and Townsville.
Mantra Group chief executive Bob East said in a statement the new properties reinforce “the strong momentum in our organic growth strategy and consistent ability to convert our pipeline”.
In January this year the company reported it was 10% ahead of its budgeted earnings for the first half of the 2013/14 financial year, and it was on track to exceed the previous year’s full year result of $63 million EBITDA.
Franchise Council of Australia deputy chairman Jason Gehrke told SmartCompany that franchise businesses have had mixed success when they launch an IPO.
Gehrke says a prime example of a successful public franchise is Domino’s pizza chain, while the Allied Brands float a few years ago did not succeed after it pursued a multi-brand growth strategy.
“Being listed means more transparency in management, finances and strategy,” he says.
“A company that is successful before an IPO should be able to continue its success after it goes public with the value added.”
He explains that when a private franchise goes public, one of the core challenges can be ensuring that franchisees don’t take second place in importance after shareholders.
“The new shareholders can take the place as the primary stakeholder,” he says.
“Despite having to answer to shareholders, any listed franchisor should maintain the support and the service and ensure profits for franchisees.”
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