Macdonald Hotels completes its hotel sale

Friday, 26th January, 2007

Macdonald Hotels & Resorts, one of the UK's largest independent leisure groups, has completed a significant deal with the sale of 24 of its UK hotels. The hotels have been bought by Moorfield Real Estate Fund for a price in excess of £400 million. Details of the exact value are not being disclosed.

Under the agreement, the hotels will continue to be run by Macdonald Hotels & Resorts under a short-term management contract with Macdonald Hotels bidding for the long-term contract alongside two international hotel companies.

Executive Chairman Donald Macdonald said: "This is a significant transaction for Macdonald Hotels & Resorts and one which we planned to execute when we took the Company off the London Stock Exchange and back into private ownership three and a half years ago."

The properties are full service hotels located across the UK and provide a total of 2,511 rooms with conference and leisure facilities.

"Private ownership has enabled our business to deliver a major capital expenditure programme of £166m over the last three years. I believe our guests and customers can see the continued and consistent upgrading in the high quality offering in our hotels," said Mr Macdonald.

"It was an expensive but worthwhile exercise for any company to be bought back by its management team and this was completed with the full support of the Bank of Scotland, who now own 50% of the Company," he added.

The Company remains committed to realising the development potential in the remaining 45 hotels and 10 resorts in the UK and Europe.

"The hotel sector is a capital intensive business and requires a longer term view of investment. When it comes to creating long-term and sustainable value, developing our people and our hotels is much more important than any short-term profit," he added.

Marc Gilbard, Chief Executive of Moorfield Real Estate Fund, said: "Moorfield already has exposure and experience in the UK regional hotel market, with its investment in Kew Green Hotels and WA Shearings. This portfolio complements and furthers our investment opportunities for active management in this sector."

Since the inception of Macdonald Hotels in 1990 when it started off with two hotels - the Waterside Inn in Peterhead and Ardoe House Hotel in Aberdeen - there have been a number of important milestones in the company's history. This latest milestone will have a significant impact in taking the Company forward to its next stage of growth.

Macdonald Hotels' Group Finance Director Gordon Fraser said: "Since de-listing from the London Stock Exchange we have made excellent progress growing the business both organically and in developing our existing and new hotels. It has however always been our intention to reduce our debt and to strengthen our balance sheet. The deal with Moorfield allows us to do just that and gives us the platform to realise the potential in our remaining portfolio and to be in a position to take advantage of new opportunities when they arise."

"There was substantial interest when Deloitte marketed this portfolio on our behalf and we are now delighted to have come to a satisfactory deal with the Moorfield Group," he added.

The hotels involved are: Albrighton Hall, Shrewsbury; Ardoe House Hotel, Aberdeen; Brandon Hall, Coventry; Burford Bridge Hotel, Dorking; Bush Hotel, Farnham; Castle Hotel, Windsor; Dunkenhalgh Hotel,,Blackburn; Eastgate Townhouse, Oxford; The Francis, Bath; Holland House, Cardiff; Last Drop Village Hotel, Bolton; The Lodge, Cardiff; Norton Grange Hotel, Rochdale; Parkside Hotel, Milton Keynes; Queen's Hotel, Cheltenham; Shakespeare Hotel, Stratford-Upon-Avon; Southgate Hotel, Exeter; St Paul's Hotel, Sheffield; Thames Lodge, Staines; Wessex Hotel, Winchester; Whately Hall, Banbury; White Hart Hotel, Salisbury; White Horse Hotel, Dorking; and Holland House, Bristol.

Notes to Editors:

Herbert Smith LLP were legal advisors to Moorfield Real Estate Fund and RSM Robson Rhodes LLP were tax advisors. Deloitte acted as lead advisor on the deal, and also provided tax structuring advice to Macdonald Hotels Limited. Stephenson Harwood were legal advisors to Macdonald Hotels Limited, with McGrigors advising on the Scottish property.

Macdonald Hotels & Resorts Limited operates 68 hotels and six resorts throughout the UK and four resorts in Spain, and controls a business with an annual turnover in the region of £250 million. First established in 1990 by Donald Macdonald and colleagues, the company was floated in 1996 on the main London Stock Exchange. In 2003, it returned to private ownership and was one of Scotland's biggest public to private deals at a cost of £590m, which was wholly underwritten by the Bank of Scotland. The Bank now owns 50% of the equity with the remainder held by the management. This move will give the board the ability to invest further in developing the portfolio of four and five star hotels.

Over the last two years in excess of £166 million has been invested in the refurbishment of properties, the purchase of two hotels from Hilton Group in Aviemore, and the development of Holland House Cardiff, and Macdonald St Paul's in Sheffield. The Group has already embarked on a programme of investment, refurbishing and organically extending a number of properties across the country and creating new city centre hotels such as Manchester which is due to open in late Summer 2007.

Moorfield Group:The corporate strategy of Moorfield Group is to acquire real estate, real estate-related opportunities and asset rich companies in the UK where active corporate, asset and financial management is expected to enhance both income and capital returns thereby increasing earnings and asset value. Over the past seven years Moorfield Group has successfully completed over £2 billion of transactions. The size of the transactions completed has ranged from £0.5 million to over £450 million with the majority over £50 million. The company has also lead fully funded bids for individual transactions with a lot of size of over £2 billion.

Moorfield Real Estate Fund Limited Partnership (MREF) was established by Moorfield Group in July 2005 and is a private equity fund focused on real estate and real estate-related investment opportunities. MREF has over £1 billion of purchasing capacity plus the ability to raise further funds through co-investment with its international 'blue chip' fund investors.

For further press information please contact:
Kenny Kemp of Kemp Communications (UK) on 0774 708 7957
Lynn Hunter in the Macdonald Hotel's press office on 01506 815246.

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