Buyers Eye Munday Hotel Sale

By Andrew Starke

Geelong pub baron, Rick Munday, is set to sell his eight remaining Victorian hotels for an estimated $50 million, with three offers already on the table.

The Munday Group’s hotel portfolio has steadily shrunk since 2007 when the group embarked on a long-term strategy to exit the sector.

Contacted by TheShout, Jones Lang LaSalle (JLL) agent, John Musca, said the broker had already received three private equity offers to acquire the hotels, despite not yet having embarked on a national advertising campaign.

He would not reveal the identities of the interested parties.

However, industry insiders contacted by TheShout, were of the opinion that the assets were unlikely to be attractive to big players like Woolworths, Coles or Tabcorp.

One source suggested a small- or medium-sized operator was a more natural fit and named Computershare executive chairman, Chris Morris, as a potential buyer.

In August last year Morris purchased the Melbourne-based hotel group, Cornerstone Hotels, after the company went into receivership and he is believed to still be on the acquisition trail.

The Independent Pub Group (IPG) acquired seven Queensland and South Australian hotels from Munday in 2008 in a $61.5 million deal.

Last year the group sold the Lorne Hotel to John Upham for an estimated $20 million and the Torquay Hotel business to freehold owner Simon Vickers-Willis.

The timing of the current sale reflects both returning private equity interest in the pub sector and the resolution of licensing and tax issues that have caused uncertainty in Victoria’s gaming industry.

Most of the eight hotels - Melton's Golden Fleece Hotel, the Golden Nugget in central Melbourne, Carlton's Players on Lygon, the Grand Hotel in Frankston, Prahran's Court Jester Hotel, the Sugar Gum in Sydenham, Patterson Lakes' The Cove and Warrnambool's The Whalers Inn - have poker machines.

“With the Victorian Gaming Commission having now announced the parameters surrounding Venue Operator Licences, and bidding for EGM’s therein, and having released the proposed gaming tax rates from 2012, quality gaming hotel portfolios such as this can expect to see a significant increase in sustainable EBITDA.,” Jones Lang LaSalle Hotels national director of pubs, John Musca, said.

He added that the eight long-term leaseholds had immediate annual revenues of more than $30 million with a combined total of 432 electronic gaming machines.

Musca said the three offers currently on the table indicated a sale price exceeding $50 million.

While Rick Munday was unavailable for comment, a spokesperson told TheShout that the group had received several expressions of interest from private equity operators over the past few months.

He said the sale expected to ‘flush out’ the market and reveal potential buyers.

Expressions of interest for the Munday Hotel Group close on March 11.