Addis Fortune (Addis Ababa)

5 August 2012

Ethiopia: Investors Eying Full Auction of Ghion Hotel

Ghion Hotels Addis Abeba was established in 1951 over a lush 12ht compound.

The intended sale of Ghion Hotel Addis Abeba, known for its spacious 12ht compound and birdlife, has drawn a lot of attention from notable local and international investors.

Around 12 companies have so far bought bid documents including billionaire tycoon Mohammad Ali-Al Amoudi's conglomerate MIDROC Ethiopia and importing giant GET-AS international, whose major owners are Getu Gelete and his brother Asrat; the tender will be opened on August 8.

Interest from international companies is more varied ranging from hoteliers to real estate and construction companies.

China Communications Construction, a large state owned company involved in the design and construction of roads bridges and railway; Southern Sun, a South African company which manages several hotel chains including part of the internationally widespread mid-priced Holiday Inn Hotel chains located in South Africa, and Panorama International, an American company which provides consulting services for real estate developers have all bought bid documents.

The Privatization and Public Enterprises Supervising Agency (PPESA) had put Ghion on the auction bloc, along with five other enterprises including Awash Winery on June 25, 2012.

When bids are opened next Wednesday August 8, 2012, it is Ghion that is expected to fetch the highest price out of the six companies, with the Hotel's indicative price alone set at 150 million dollars.

Part of 11 hotel branches under the Ghion Hotels Enterprise, this is the first time that Ghion Addis had been put on the auction bloc in full, although previously the Agency had sought Joint Venture (JV) agreements with private individuals and companies for the management of the Hotel.

Its most recent agreement was with German Company Dnknesh Vermogenveeravltung Gmbh (DV). Its representative Aklileberehan Mekonen, who claimed to be a member of the Ethiopian royal family, had agreed to pay 8.3 billion Br for the deal and signed a Memorandum of Understanding (MoU) with the Agency in August 2010. The hotel was to be reestablished with 310 million dollars with PPESA owning 20pc.

However Aklileberehan failed to make the 3.5 billion Br down-payment on time and did not appear for the expected signging of the contract which was to be held in November that year.

The Agency prefers a full transfer of an enterprise through auction instead of a Joint Venture (JV) in any case, according to an official from the PPESA.

Despite the interest in Ghion, purchase of bid documents may not in the end lead to submission of offers according to the manager of one of the companies that had bought bid documents.

"We buy different documents searching for potential business opportunities but we do not go ahead and actually offer bids", the manager told Fortune.

The Agency has made a wise choice by deciding to fully privatize Ghion Hotel, according to an expert who was formerly in the Hotel business for the past 18 years and has had a chance to view the bid document.

"Most investors prefer to manage the hotel by themselves instead of being partially involved," he said.

The Hotel is one of the last two still under the Ghion Hotels Enterprise. "The only hotel remaining under the Enterprise now is Abraha Palace in Mekelle," a marketing official at the Enterprise told Fortune.

The interest it had garnered so far has not been surprising according to the expert.

"The lush compounds and its location will prove attractive to foreign investors even if the hotel building and its history may fail to impress," he told Fortune.

Initially called the Garden Palace Hotel for east Africa for its proximity and easy backyard access to the Jubilee place, located on Menilik II street, the hotel was established in 1951.

Reestablished as a state owned enterprise in 1991, the Hotel currently boasts 191 rooms, an Olympic sized swimming pool and employs around 801 employees. However its last major renovation was during the Dergue Era and it is currently operating at 58pc of its capacity.

"Major renovations are needed as the building has electromechanical problems," the expert told Fortune. "However the investment on renovation is sensible investor could easily see a return in a few years for the Hotel which has had a 20 million Br profit three years ago."

The tender for Ghion and the five other enterprises was supposed to be concluded in the just ended 2011/12 fiscal year as part of the 23 enterprises the Agency had planned to privatize, five of them partially as a joint venture.

However as the tender was floated late, the bid opening date has been pushed to August.

Prior to putting Ghion on the auction bloc, the Agency had previously floated two tenders putting 14 enterprises up for sale in the 2011/12 fiscal year, although offers for only nine of the companies have been approved by the Agency, as the rest of the enterprises had either failed to attract bidders or had brought offers below the indicative prices set by the Agency.

None of the joint venture agreements including the one for Ghion Hotel have worked out for the Agency this year. Even after having approved nine offers, the Agency has had trouble collecting down payments from companies.

Four MIDROC affiliated companies, whose lucrative 1.3 billion Br offer for five state owned enterprises had been approved by the Agency, had not paid any of advances the previous fiscal year, although they have started doing so recently.

It was the same case with another American company, Morell Agro industries, which has failed to make down-payments after its six million dollar offer for Bilito Siraro farms was approved.

Despite being unsuccessful in terms of the number of companies it had actually transferred the PPESA had surpassed its target in terms of the amount of money it had collected from privatized companies. This is after collecting 3.8 billion Br from Diageo for the sale of Meta, 1.9 billion Br from Heineken as it completed payments for its acquisition of Harar and Bedele breweries and 46 million Br as down-payment from Ayat Real Estate after their acquisition of Ras Hotel.

Ghion and the other five companies including Batu construction SC, Limu Coffe Plantation Development enterprise and its six warehouses to be sold privately, Construction Works & Coffee Technology Development and Engineering Enterprise, will now be added to the 24 enterprises that the Agency plans to privatise during the current fiscal year.

Ads by Google

Copyright © 2012 Addis Fortune. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 2,000 reports a day from more than 130 news organizations and over 200 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.