M&C's Seoul hotel sale falls through

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CITY Developments' London-listed hotel subsidiary, Millennium & Copthorne Hotels (M&C), announced yesterday that the agreement for the disposal of Millennium Seoul Hilton to Kangho AMC Co has been terminated with immediate effect.

The buyer was unable to finalise its financing arrangements by the extended completion date of Nov 28 amid the global financial turmoil. This will have implications on M&C and CDL bottomlines as the two had been expected to book profit from the disposal in Q4 2008. CDL controls about 53 per cent of M&C.

When the 580 billion Korean won (S$596 million) disposal of the hotel was announced in June, M&C had said it would book a pre-tax profit of £pounds;155 million (S$359 million) from the divestment. But on the flip side, M&C will get to keep the 59 billion won non-refundable deposits it has collected so far from Kangho, a Korean real estate and architectural services group.

Following the termination of the disposal, M&C will continue to manage the hotel. The chain has faced labour problems as well as escalating labour costs operating the hotel since it bought the freehold property in 1999 for US$228.5 million.

Following the June 24 announcement of the proposed disposal by M&C, on Sept 19 M&C announced that Kangho had asked the company for an extension of the completion date originally scheduled for Sept 30, 2008, whilst it finalised the terms of its financing arrangements. On Sept 29, M&C announced that the company and Kangho had agreed, among other things, to the amendment of the completion date of the disposal from Sept 30, to Nov 28, 2008.

In its release yesterday, M&C said: 'While the company was ready, willing and able to complete the disposal, Kangho has, in the current difficult financial markets, been unable to finalise its financing arrangements and, consequently, the remainder of the purchase price remains unpaid.

'The agreement for the disposal has therefore terminated with immediate effect.'

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