Government hotel share divestiture suffers yet more delays


(Posted 12th August 2013)


The finishing line tape for the privatization of government held shared in the Mountain Lodge, the Hilton Nairobi and the InterContinental Hotel Nairobi suddenly seems to get more distant again, rather than coming closer, as more recent announcements suggested this may go into the final stretch by August this year.

Repeatedly delayed in the past, for various reasons, the latest delay is according to the Privatization Commission of Kenya a result of missing information required to complete the due diligence, before an asking price can be set for the share, which then must be offered to existing shareholders under a first right of refusal clause.

A Nairobi based source indicated that two out of the three properties singled out for the first round of selling off such stakes, are nearly complete – though suggesting delays there too – while information from the third unit appears far from complete.

The need of government for more funds to finance their ambitious election campaign promises, combined with having to find at least 25 million US Dollars to repair the damage of the recent fire at JKIA, left the government with little choice but to sell off some of the share assets held in hotels and lodges, though there will be a fair amount of arguments over the expected variances in asking and offering prices for those shares.

While there is little doubt that Serena Hotels will happily take over the share of Mountain Lodge, a property they have invested in and been managing now for many years, the sale of the Hilton shares may prove more difficult to accomplish, as the shareholders then, in addition to that expense, must find the funds to co-finance the long delayed refurbishment of this downtown hotel, which in recent years has lost its shine and lustre and requires a massive capital expense to try and lift the property back to acceptable Hilton standards.

At the InterContinental Hotel though two key shareholder groups have already indicated their both interest to acquire the shares government intends to sell, raising the prospect of one trying to outbid the other to the benefit of government earning more than forecast.

Be that as it may, the new delay is not boding well for the completion of the transaction, which the source in Nairobi now puts into 2014, rather than completing all three divestitures in 2013 as was anticipated.

Watch this space for regular and breaking news updates from Eastern Africa’s vibrant and fast expanding hospitality sector.

One Response

  1. It will be interesting to see how things develop and in particular what effect it will have on the hotel industry.