Transfer of Assets

21 December 2016

PPHE Hotel Group Limited
("PPHE Hotel Group")

Transfer of Assets

PPHE Hotel Group, which together with its subsidiaries (the "Group") owns, leases, develops, operates and franchises full service upscale and lifestyle hotels in major gateway cities, regional centres and select resort destinations, predominantly in Europe, announces that it proposes to transfer its German and Hungarian operations (consisting of companies and hotel properties) to its non-wholly owned subsidiary Arenaturist d.d ("Arenaturist") in exchange for 1,091,250 new shares in Arenaturist (the "Capital Contribution"), valued at forty seven pounds (£47) per share (using the average traded price of an Arenaturist share on the Zagreb Stock Exchange in the week preceding the Capital Contribution).  The Capital Contribution is subject to the approval of the Arenaturist Management Board, such approval to be considered at a meeting expected to be held on 23 December 2016.  The Capital Contribution is consistent with PPHE Hotel Group's strategic plans to develop Arenaturist into a substantial Central and Eastern European leisure and hospitality company with a unique business model that would entail owning and managing its own assets and those of others primarily under the Park Plaza brand.

Background

PPHE Hotel Group indirectly owns 65.63% of the issued share capital of Arenaturist through its wholly-owned subsidiaries Euro Sea Hotels N.V. and Dvadeset Osam društvo s ograničenom odgovornošću za turizam, ugostiteljstvo i usluge ("Dvadeset Osam").

On 31 October 2016, Arenaturist's Croatian operating subsidiaries, Arenaturist Zlatne stijene d.o.o., Arenaturist hoteli d.o.o. and Arenaturist turistička naselja d.o.o. were merged into Arenaturist having previously been sold to Arenaturist by a wholly-owned subsidiary of PPHE Hotel Group for cash consideration of HRK 108.55 million (€14.4 million) on 30 June 2016.

On 21 November 2016, Arenaturist's shares were admitted to the Official Market of the Zagreb Stock Exchange having previously been admitted to the Regular Market of the Zagreb Stock Exchange.  This premium listing was a significant step for Arenaturist, bringing with it higher standards of corporate governance.  It is expected that such a move will improve the liquidity of trading in Arenaturist's shares and raise Arenaturist's profile both domestically and internationally.

At the Arenaturist Shareholders' Meeting held on 31 August 2016, its shareholders authorised the Management Board to increase the share capital of Arenaturist by up to fifty per cent within an eighteen month period in order to acquire hotels and hotel operations owned by the Group, as well as a licence to use one or more of the Group's brands in certain countries in Central and Eastern Europe (the "Decision").

Pursuant to the Decision, new Arenaturist shares may be issued in consideration for a contribution in kind and/or rights.  Furthermore, under the Decision, the Management Board is authorised to exclude any pre-emptive rights of the existing Arenaturist shareholders when issuing such new shares.

The Capital Contribution

In accordance with the Group's strategic plans for the development of Arenaturist into a strong leisure and hospitality company in Central and Eastern Europe, PPHE Hotel Group proposes to contribute its German and Hungarian operations (consisting of companies and hotel properties held by Sugarhill Investments B.V. ("Sugarhill"), which currently forms part of the Group) in exchange for 1,091,250 new shares in Arenaturist. The fair value of Sugarhill's share capital against which Arenaturist will issue new shares was ascertained by an independent Big Four accounting firm which was retained by Arenaturist's Executive Directors.  The value is also expected to be verified by the auditor appointed by the Court pursuant to the Croatian Companies' Act.  This contribution will add a portfolio of 7 owned and/or leased upscale hotels and 1 managed upscale hotel comprising 1,295 bedrooms (the "Hotels") to Arenaturist's and its subsidiaries' (the "AT Group") portfolio.  The Hotels include properties in key tourist and business centres such as Berlin, Budapest, Cologne and Nuremberg.  The Capital Contribution will diversify the AT Group's revenues across countries, hotel types, market segments and hotel operating agreements whilst reducing the seasonality of its operations. It is expected that this will also give rise to significant operating synergies and create a unique hospitality company in the region.

In order to further expand the AT Group in Croatia and other countries in the region, PPHE Hotel Group will transfer the hotel management agreements for the Hotels to a newly established subsidiary, Arena Hospitality Management d.o.o., ("Arena Hospitality") (a wholly-owned subsidiary of Sugarhill).  PPHE Hotel Group will also grant an exclusive sub-license (the "Licence") to Arena Hospitality to use the Park Plaza^® brand in the territories of Croatia, Germany, Austria, Bulgaria, Slovenia, Bosnia and Herzegovina, Montenegro, Kosovo, Serbia, Albania, Romania, Moldavia, Ukraine, Slovakia, the Czech Republic, Poland, Belarus and Hungary (the "Territory").

The Hotels are owned or leased by Sugarhill and its subsidiaries (the "Sugarhill Group"). Various members of the Sugarhill Group are party to the hotel operating agreements for each of the Hotels, the leases to the Hotels and the Licence.

Hotels to be Transferred

The table below details the Hotels to be transferred to Arenaturist pursuant to the Capital Contribution:

¹ First year of operation under the Park Plaza or art'otel brand

¹Year of commencement of operations under the Park Plaza or art’otel brand

Overview of Sugarhill's key financials

Following the Capital Contribution, Arenaturist will become the majority owner of the Sugarhill Group, and thereby, indirectly, the ''owner'' of the Hotels and the Hotel operations which PPHE Hotel Group owns independently or with partners in Germany and Hungary, including the hotel management agreements and the licence to use the brand Park Plaza^® as stated above.

In order to continue to benefit from the opportunities provided by the global Park Plaza Hotels & Resorts system and the partnership of the Group with Carlson Rezidor, the Hotels will each enter into a licence, sales and marketing agreement with a member of the Group which will greatly enhance Arenaturist's ability to attract and retain guests and provide them with a world-class service in a globalising market place.

The Capital Contribution is subject to the approval of the Arenaturist Management Board, such approval to be considered at a meeting expected to be held on 23 December 2016.  A further announcement regarding the outcome of this meeting will be made in due course.

Boris Ivesha, President & Chief Executive Officer of PPHE Hotel Group, said:

"This transaction is a key step in the implementation of our strategy to develop Arenaturist into a strong leisure and hospitality company in Central and Eastern Europe. The transfer of these hotel assets provides Arenaturist a platform upon which to expand its operations in Central and Eastern Europe."

This announcement contains inside information for the purposes of Article 7 of Regulation 596/2014.

Enquiries

Notes to editors

PPHE Hotel Group Limited is a Guernsey registered company and through its subsidiaries, jointly controlled entities and associates, owns, leases, operates, franchises and develops full service upscale and lifestyle hotels in major gateway cities, regional centres and select resort destinations, predominantly in Europe.

The majority of the Group's hotels operate under two distinct brands, Park Plaza® Hotels & Resorts and art'otel®. The Group has an exclusive licence from Carlson, a global privately held hospitality and travel company, to develop and operate Park Plaza® Hotels & Resorts in Europe, the Middle East and Africa. The art'otel® brand is fully owned by the Group.

PPHE Hotel Group has a controlling interest (65.63% of the share capital) in Arenaturist d.d., one of Croatia's leading hospitality companies, which is listed on the Official Market of the Zagreb Stock Exchange.  

The portfolio of owned, leased, managed and franchised hotels comprises 38 hotels in operation offering a total of nearly 8,400 rooms. The development pipeline includes four new hotel projects and one hotel extension and reconfiguration. These developments are expected to add over 800 rooms to our portfolio by the end of 2016 and an additional 500 rooms by the end of 2019.

Our Company:
www.pphe.com

Our Hotel Brands:
www.parkplaza.com
www.artotels.com
www.arenaturist.com

For images and logos visit www.vfmii.com/parkplaza