ALERT Dusit Thani Laguna Phuket Sold THB 2.62 Billion

Posted: 11 Aug 2010 | 7:06 am

Leading Thai listed resort developer Laguna Resort and Hotels Plc. have disclosed to the Stock Exchange of Thailand (SET) a transaction of the Dusit Thani Laguna Phuket for an amount of THB 2.62 billion. The buyer is Dusit Thani Public Company Limited.

The transaction comes in at approximately USDD81 million or USD358,000 a key which in terms hotel valuations by several industry sources is considered to be at the upper end of the scale. The publically listed LRH detailed in the 'Information Memorandum' on the divestment that the company had concerns over too much exposure in Thailand. As for the use of the proceeds this will be used to pay down debt, pay dividends and expand in investment abroad. It's thought that some of the funds will be used for the new Laguna Hue destination resort in Vietnam which the company is developing.

The 226 room upscale property was first opened in 1987 and was the first hotel developer K.P Ho built in what would become one of Asia's leading resort destinations - Laguna Phuket.

Adjacent to the resort are 28 pool villas which are branded and operated by the chain but are individually owned.

According to information on the Laguna Resort and Hotels Plc. website the management agreement with the Dusit chain will expire in approximately 2 years hence the valuation on a premise of a relatively short term vacant possession generated greater market interest.

This transaction marks the 3rd significant hospitality asset to be sold in Thailand this year. In Koh Samui Baan Taling Ngam traded to a Thai group and anther property in Phuket the Novotel Beach Resort in Panwa also went to a domestic buyer. The Dusit and Baan Taling Ngam deals were brokered by international firm Jones Lang LaSalle out of Singapore.

The Stock Exchange of Thailand Information Memorandum is as listed below:

No. L028/2010

10 August 2010

Subject: Information Memorandum on the Disposition of Assets of Laguna

Resorts & Hotels Public Company Limited

To: President

The Stock Exchange of Thailand

The meeting of the Board of Directors of Laguna Resorts & Hotels Public

Company Limited (the "Company" or "LRH") No. 4/2010 held on 10 August 2010

passed a resolution to approve the disposition of Dusit Thani Laguna Phuket

(the "Hotel") which consists of land, buildings, plant and machinery,

furniture, fixtures and equipment and inventory owned by LRH and its

wholly-owned subsidiaries, by way of closed bid tender (the "Disposition" or

"Transaction") at the total consideration of THB 2,620,000,000 (Thai Baht Two

Billion Six Hundred and Twenty Million).

The Company plans to use the net proceeds from the Disposition (the

"Proceeds") to invest in a hotel or hotel related project located outside the

borders of Thailand, repay bank loans, and/or pay dividends.The amount of the

Proceeds to be allocated to each of the uses shall be determined by the Board

of Directors.

The overseas investment is aimed at reducing the Company's present operations

in Phuket which presently forms the majority of the Company's income. In

2009, LRH's combined revenues generated by its operations in Phuket amounted

to almost 82% of the Company's overall revenue. In terms of the Company's

hotel revenue, just over 82% is attributed to hotels located in Phuket.

The global financial crisis which started in 2008 and the ensuing global

recession severely impacted the tourism and hotel industry in Thailand as a

whole and LRH's hotels and other tourism related businesses in Laguna Phuket

were not spared.The global financial meltdown was exacerbated by the prolonged

Thai political turmoil which deterred tourists who could afford the luxury of

travel during the recession from selecting Thailand as their holiday

destination. These unfortunate events in the last two years revealed the

Company's vulnerability and confirmed the Company's concerns that it has too

much exposure in Phuket and in Thailand. As a result, the Company has decided

to accelerate its plans to reduce its investment portfolio in Phuket and after

much deliberation came to the conclusion of disposing the Hotel.

The Transaction falls under "Transaction Type 1" and requires the disclosure

of information to the Stock Exchange of Thailand ("SET") and the approval from

the shareholders' meeting in accordance with the Notification of the Capital

Market Supervisory Board No. Thor Jor 20/2551 Re: Rules on Entering into

Material Transactions Deemed as Acquisition or Disposition of Assets, which

refers to the Notification of the Board of the Stock Exchange of Thailand Re:

Disclosure of Information and Other Acts of the Listed Company Concerning the

Acquisition and Disposition of Assets, 2004.

1. Date of Occurrence of the Transaction

Assuming the Transaction is approved by the Company's shareholders at the

Extraordinary General Meeting No. 1/2010 which will be held on September 29,

2010, the Transaction is expected to be completed on 30 November 2010 or such

other date as mutually agreed by the Parties in writing which shall not

be later than 30 December 2010 ("Completion Date").

2. Parties Involved

Sellers : Laguna Resorts & Hotels Public Company Limited ("LRH"),

Phuket Resort Development Limited ("PKRD"), and;

Laguna Grande Limited ("LGL").

Buyer : Dusit Thani Public Company Limited, the successful bidder in

the closed bid tender is not a connected party to the Sellers.

3. General Characteristics of the Transaction

The Transaction was done by way of a closed bid tender (the "Tender") of the

assets detailed in Clause 4. Jones Lang LaSalle (Thailand) Limited was

appointed as the exclusive property advisor and marketing agent for the

Disposition.

The Transaction is considered to be a Disposition of Assets in accordance with

the Notification of the Capital Market Supervisory Board No. Thor Jor 20/2551

Re: Rules on Entering into Material Transactions Deemed as Acquisition or

Disposition of Assets, which refers to the Notification of the Board of the

Stock Exchange of Thailand, Re: Disclosure of Information and Other Acts of

Listed Companies Concerning the Acquisition and Disposition of Assets, 2004.

Since the highest transaction size as calculated by the "Net Profit After Tax"

(calculated from the reviewed/audited financial statement based on the

12-month period from 1 July 2009 to 30 June 2010) method is over 50%, it is

classified as "Transaction Type 1", and therefore requires the disclosure of

information to the SET and the approval from the shareholders' meeting with a

vote of not less than 75% of total voting right of shareholders who attend the

meeting and are eligible to vote.

4. Details of the Assets to be Disposed

4.1 Summary of Dusit Thani Laguna Phuket Hotel

Property Name Dusit Thani Laguna Phuket Hotel (assets under LRH)

Location Bang Tao Beach, Phuket

390/1 Moo1 Srisoonthorn Road, Cherngtalay, Thalang, Phuket

83110

Description of the Hotel -A 5-star luxury hotel comprising 226 rooms and

various facilities in low-rise buildings

- Situated on 6 contiguous land plots, totaling

33.66 rai or 13,462.7 square wah owned by LRH

and its wholly-owned subsidiaries (PKRD and LGL)

- Facilities include six dining outlets, four

conference

rooms, business centre, spa, swimming

pool, two tennis courts, retail shops, water

sport centre, kids club, beachside and garden

wedding venues, fitness centre, and car parking.

Asset Items Land, buildings, plant and machinery, furniture, fixtures

and equipment, and inventory

Obligation Land and buildings are mortgaged to a local bank. The

release of the mortgage is expected to be completed by the occurrence date of

the Transaction.

4.2 Financial Information

Apart from the Hotel, LRH owns and operates other hospitality related

businesses including investments in a number of hotels through subsidiary

companies. As the Hotel is one of the businesses owned by LRH, the Hotel does

not have its own reviewed/audited financial statement. The financial

information used in the transaction size calculation is therefore based on

management accounts and other financial information extracted from LRH's

reviewed/audited financial statements. The financial information used in the

calculation of the transaction size is summarized as follows:

Summary of Financial Information for Transaction Size Calculation

(Unit: Million Baht) As at As at As at As at

31 March 2010 30 June 2010 31 December 2009 31 December 2008

Total assets(a) 1,092.19 1,024.27 1,096.85 1,818.18

Total liabilities(b) 95.88 98.82 143.21 119.71

(Unit: For the 3 months For the 12 months For the 12 months For the 12

Million ended 31 March 2010 from 1 July 2009 ended 31 December months ended

Baht) to 30 June 2010 2009 31 December

2008

Total revenues(c) 232.13 525.12 474.09 488.44

Total expenses(c) 121.22 387.3 372.04 353.10

Profit before tax 110.90 137.77 102.05 135.34

Net profit(d) 83.01 102.66 76.11 101.56

(a) Includes cost of land which are co-owned with subsidiaries of LRH

(b) Includes only accounts payable and other liabilities items, excluded bank

loans

(c) Includes revenue and shared expenses from Dusit Villas

(d) After deducting corporate income tax from taxable profit at the rate

25%

4.3 Details of Assets

4.3.1 Land

6 continuous land plots, totaling 33.66 rai or 13,462.7 square wah owned by

LRH and its wholly-owned subsidiaries (PKRD and LGL), situated at Cherngtalay

Sub-District, Talang District, Phuket Province, details as follows:

Title Deed No. Location Owner

1. 4210 Bang Tao Beach, Phuket LRH

2. 42110 (Partial, in 2 subdivided plots) Bang Tao Beach, Phuket LRH

3. 5917 Bang Tao Beach, Phuket LGL and LRH

4. 11956 Bang Tao Beach, Phuket LGL and LRH

5. 5971 (Partial) Bang Tao Beach, Phuket PKRD and

LRH

4.3.2 Hotel Buildings

Description Location Owner

1. Low-rise buildings consisting Dusit Thani Laguna Phuket Hotel LRH

of 226 rooms and facilities

4.3.3 Plant & Machinery

Description Location Owner

1. Power supply system,

generators, air-conditioning systems,

cold and hot water systems, waste

water systems, fire protection systems,

lifts, PABX system, MATV system. Dusit Thani Laguna Phuket Hotel LRH

4.3.4 Furniture, Fixtures & Equipment and Inventory

Description Location Owner

1. Furniture, fixtures, building

improvements, all equipment and inventory

used in the operations of the Hotel.

Dusit Thani Laguna Phuket Hotel LRH

5. Total Value of Consideration and Payment Conditions

Total Consideration : THB 2,620,000,000 (Thai Baht Two Billion Six

Hundred and Twenty Million). All fees and taxes payable for the

transfer of the Assets Disposed shall be borne by the Buyer.

Payment method : The Buyer shall pay as follows:

- An initial amount equivalent to 10% of the Total Consideration within

5 working days from the execution of the Asset Purchase Agreement;

- A further 89% of the Total Consideration on 30 September 2010

and;

- The final 1% of the Total Consideration on the Completion Date.

6. Value of the assets Disposed

As of 30 June 2010, the value of the disposed assets is approximately THB

962.59 million (total book value of buildings, plant and machinery, furniture,

fixtures and equipment and inventory of the Hotel is approximately THB 417.30

million and total book value of land on which the Hotel is located and owned

by LRH, LGL and PKRD is approximately THB 545.29 million).

Asset items Book Value (Million Baht)

as at 30 June 2010

Land 545.29

- No. 42109 276.26

- No. 42110 (partial, in 2 subdivided plots) 12.54

- No. 5917 33.72

- No. 11956 3.20

- No. 5971 (partial) 219.57

Others 417.30

- Buildings 292.11

- Plant & Machinery, Furniture,

Fixtures & Equipment and Inventory 125.19

Total 962.59

7. The Criteria in Setting the Value of Consideration

The highest price offered by bidders in the Tender.

8. The Rationale in Entering the Transaction and Expected Benefits

As explained in the preamble of this letter, the Company is presently too

reliant on its operations in Phuket and is therefore vulnerable to any adverse

events which impact the Thai tourism industry. By entering into the

Transaction, the Company will be able to reduce its exposure in Phuket and

therefore reduce its country risks.

9. Plans for Use of Proceeds from the Assets Disposition

The Company plans to use the Proceeds to invest in a hotel or hotel related

project overseas, repay bank loans, and/or pay dividends to its shareholders.

The Board of Directors shall have the discretion to examine and ascertain the

appropriateness of each of the aforementioned uses and the amount of the

Proceeds to be allocated, if any, to each of them.

10. Opinion of the Board of Directors on the Transaction

As the Total Consideration is higher than the book value of the assets to be

disposed, the Company will immediately realize a gain from the Disposition

and at the same time reduce the Company's exposure in Phuket.

With the Proceeds, the Company will have the financial means to explore

investment opportunities overseas, repay bank loans and/or pay dividends to

shareholders. If the Company is able to make a successful investment

overseas, this would enable the Company to achieve a more diversified

investment portfolio and reduce any adverse impact to its income when there

are problems in the Thai tourism industry. In the event that the Company

decides to repay some of its bank loans, the Company would be able to reduce

its interest expense and preserve its borrowing ability for future investment

opportunities. Shareholders of the Company would potentially benefit from a

dividend payment should this be declared by the Company.

11. Opinion of the Audit and Risk Committee or the Director of the

Company that is Different from the Opinion of the Board of Directors of the

Company

The Audit and Risk Committee concurs with the opinion of the Board of

Directors of the Company.

Please be informed accordingly.

Sincerely yours,

Laguna Resorts & Hotels Public Company Limited

(Mr. Michael Ramon Ayling) ( Mr. Stuart David Reading)

Directors

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