Updated from 7:12 a.m. EST
The hotel sector took flight Monday after
founder and chief executive offered to take the company private for $82 a share, representing a 28% premium to Friday's closing price.
Isadore Sharp, the company's CEO and controlling shareholder, is being backed in his bid by Kingdom Hotels International, a company owned by Saudi Prince Alwaleed Bin Talal Bin Abdulaziz Alsaud, and Cascade Investment, an entity owned by
founder Bill Gates.
Kingdom Hotels took
private earlier this year.
The lofty deal valuation for the posh chain sent other hotel stocks soaring.
, a luxury resort owner that has been mentioned as an attractive private equity buyout candidate, rose 6.8% to $39.94.
rose 3.5% to $29.59, and
rose 2.8% to $59.91.
The Four Seasons deal amounts to a P/E ratio of 44.4 times the company's estimated 2007 earnings per share and 31.9 times estimated 2007 earnings before interest taxes, depreciation and amortization, according to Deutsche Bank analyst Bill Lerner's estimates.
"These multiples are curiously strong -- particularly since there is virtually no underlying real estate -- and handily exceed the prior high-water mark for a going-private transaction in the hotel sector, which was set by Kingdom's acquisition of Fairmont in May '06," Lerner wrote in a research note Monday morning.
The Fairmont deal came at an estimated 15.4 times 2006 EBITDA, he says.
Under the proposed Four Seasons buyout, Sharp would remain as chairman and CEO of the hotel company after the acquisition. Sharp would be entitled to realize proceed related to a long-term incentive agreement that was put in place in 1989. The total value of that plan is $288 million.
Four Seasons' board has established a special committee of independent directors that will consider the deal.
Four Seasons shares recently were up 32% to $83.99.
The fact that the stock is trading above the offer price suggests investors think another party might make an offer. But Lerner, the Deutsche Bank analyst, says he cannot envision any competing bids that could trump the current offer on valuation alone. He expects shareholders to approve the current offer.