Pandox acquires Hotellus International AB

Pandox has reached an agreement with all shareholders of Hotellus International AB ("Hotellus") to acquire their shares in Hotellus. The acquisition is conditional upon due diligence and that the shareholders at the Annual General Meeting ("AGM") in Pandox on March 30, 2000, make the necessary decision regarding an issue in kind of new shares.

The acquisition will be financed through a combination of newly issued shares in Pandox and cash. The number of shares in Pandox will increase by 9,900,000 shares and new debt will be raised to finance the cash element, which totals approximately SEK 104 M.

Earnings and cash flow per share will increase by SEK 0.12 and SEK 0.07 respectively, for pro forma 1999 compared to the reported profit 1999. Following the acquisition, Pandox is expected to increase earnings and cash flow per share by 15% in 2000, compared to the reported profit for 1999. The acquisition of Hotellus is due on March 31, 2000.

Background and objectives

Pandox is a pure hotel property company and has been listed on the OM Stockholm Exchange's O-list since June 23, 1997. Pandox strategy is to own one kind of asset - hotel properties. Its specialisation is strengthened by the focus on large hotels in central locations in areas with a strong potential and natural affinity for growth in the hotel property market, such as airports and exhibition areas. The hotels' operations are mainly directed towards business travellers and tourists.

Pandox Board of Directors has decided to extend its current strategy to increase its geographical coverage of the northern part of Europe. The objective is that a larger geographical area implies a greater potential for market growth and risk diversification. Furthermore, the business cycle for hotels can be better utilised for feasible acquisitions.

In order to strengthen its focus and enhance future potentials, Pandox will collaborate with strong, well-known brands when entering new markets. This collaboration will be developed with existing partners and be based on terms of agreements with which Pandox is accustomed.

Through the acquisition of Hotellus, Pandox has created a strong platform to enhance its strategy and gains a large portfolio of well-known quality hotels in large hotel markets in order to strengthen the rental structure and cash flow. All the hotel properties included in the acquisition are operated by Scandic Hotels and marketed under the Scandic Hotels and Holiday Inn brand names. The acquisition includes hotels in strong hotel markets and the structure of the lease agreements is well known to Pandox.

The acquisition of Hotellus means enhanced earnings and cash flow per share. At the same time the strategy to focus on large hotels in central locations in major hotel markets continues. Thereby the quality and the potential in Pandox property portfolio are improved. Pandox market capitalisation will increase considerably, which is expected to create conditions for improved liquidity in the share. Synergies are estimated to total about SEK 7 M annually.

Due to the fact that the operation of a hotel directly affects its feasibility, the selection of an operator is a determining factor for the good growth of earnings. Pandox therefore continue its collaboration with strong brand names. Pandox and Scandic Hotels today have a history of extensive co-operation regarding lease agreements and collaboration for increased feasibility.

Pandox working methods have been standardised during 1999 and documented in order to create a platform for the transfer of knowledge when entering new markets. Systems for market information have been extended to include all countries in the northern part of Europe. The professionalism of Pandox Board of Directors and management, together with the competence within Hotellus will secure an excellent platform for development in an international context.

Scandic Hotels and Holiday Inn together operate 500 hotels in northern Europe. Both are focused on the upper middle class, which is the same segment that Pandox is focusing on. The collaboration with these fast-growing and leading brands implies a significant growth and development potential for Pandox.

"Pandox continues to grow in new and interesting hotel markets together with an operator we know well. Pandox has long been co-operating with Scandic Hotels in Sweden and the expansion into northern Europe is therefore a natural development of that co-operation. Pandox methods and focus on feasibility and cash flow in combination with the experience within the Hotellus organisation, creates very good conditions for future growth in value for the shareholders," says Anders Nissen, CEO of Pandox.

Statements from major shareholders

- "Hotellus and Pandox complement one another very well and in joining forces they are forming a company that, in terms of size, will be an interesting player in the hotel property market. With its knowledge of the industry and developed strategy, Pandox will be an excellent business partner for Scandic in view of our plans to expand in the Nordic region and northern Europe. Pandox demand on integrity towards other operators is strong, which we will respect. The shareholding in Pandox is a strategic holding and we expect to see our investment grow in value," says Roland Nilsson, President and CEO of Scandic.

- "The transaction is industrially right. Through Pandox acquisition, the value and the potential in Hotellus can be developed and thereby added value for the shareholders. We look positively on our ownership in Pandox and therefore we have chosen to accept shares as payment for our shares in Hotellus," says Göte Dahlin, CEO of Nordisk Renting.


Description of Hotellus

Hotellus was created in December 1997 as a wholly owned subsidiary of Scandic Hotels AB. Since then, Hotellus has expanded through acquisitions of hotel properties and today the company is one of the five largest owners of hotel properties in the Nordic countries, in terms of the number of rooms. Through the acquisitions, new owners have entered and Scandic Hotels' share has decreased to 49.9%. The three largest shareholders in Hotellus are Scandic Hotels, Nordisk Renting and Länsförsäkringar Wasa Liv.

Hotellus' business concept has been to own and develop hotel properties in northern Europe in close co-operation with leading, non-competing brands. Hotellus has been co-operating with well-established brands such as Scandic Hotels and Holiday Inn. Scandic Hotels operates all of Hotellus' hotel properties.

Income and turnover-based lease agreements are of prime importance in the co-operation between Hotellus and the operator. This means that joint efforts are made to optimise the turnover through refurbishment of buildings and adjustment of the operations. The average lease duration for the income-based lease agreements is 10-15 years.

Hotellus owns 16 hotel properties of which eight are located in Sweden, three in Germany, three in Belgium, one in Denmark and one in the UK. The total number of hotel rooms is 3,589 and the total area is 224,223sq m. During 1998, Hotellus acquired a plot in Mölndal, where a new hotel is under construction. The new hotel will replace the old Scandic Mölndal. The 208-room hotel is due to open at the end of April 2000. At the end of 1999, Scandic Hotel Park in Stockholm and Hotel Albert Premier in Brussels were acquired for SEK 440.7 M.

The rental income for 1999 amounted to SEK 181 M and the operating net was SEK 148 M. Hotellus' net profit for 1999 was SEK 70.8 M. The average direct yield for the hotel properties was 9.0% based on book value.

The equity ratio at December 31, 1999, was 37.7%. The assets outside Sweden are financed in local currency. This implies that the effect of exchange rate exposure only marginally effected the equity during 1999. The book value at December 31, 1999 of the hotel properties was approximately SEK 2,175 M, distributed in each country as shown in the table below.

Sweden 37 %
Denmark 19 %
Germany 18 %
Belgium 13 %
United Kingdom 13 %

Press conference.

In connection with this acquisition, a press conference will be held today, February 7, at 12:00 at the Scandic Hotel Park in Stockholm.

Enskilda Securities is advisor to Pandox.




Stockholm February 7, 2000
PANDOX HOTELLFASTIGHETER AB

The Board of Directors

The full pressrelease including tables and appendix is available to download from the enclosed link.

http://reports.huginonline.com/Eng.pdf