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China Motel168 plans $100 mln Nasdaq IPO - sources
Wed Feb 14, 2007 5:38 AM ET



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By George Chen and Daisy Ku

SHANGHAI/HONG KONG, Feb 14 (Reuters) - China's Motel168, one of the country's three biggest budget hotel chains, plans to raise about $100 million through an initial public offering on Nasdaq, sources familiar with the plan said on Wednesday.

Motel168, controlled by privately run Shanghai hotel and restaurant manager Merrylin Holdings Ltd., has hired Wall Street investment bank Morgan Stanley <MS.N> to advise it on the IPO, planned for the third quarter of this year, the sources said.

Morgan Stanley is also a major shareholder in Motel168 after an investment arm of the bank paid $20 million for a 20 percent stake in late 2005, the sources said.

"Motel168 is hungry for capital now as it has to compete with Home Inns, Jinjiang Inn and other rivals for aggressive land purchases to build more hotels," said one Shanghai-based source close to Motel168.

"If you don't speed up, then you lose market share and soon you will be completely out of the race," said the source, who declined to be identified before an official announcement.

The planned listing follows a $109 million Nasdaq IPO in October by Home Inns & Hotel Management Inc. <HMIN.O>, a bigger Chinese rival of Motel168, reflecting investor belief in demand for budget hotels in the world's fourth-largest economy.

Shares in Home Inns have more than tripled since listing.

In December, Shanghai Jin Jiang International Hotels (Group) Co. <2006.HK> raised $310 million through a Hong Kong listing in an effort aimed partly at funding expansion of its Jinjiang Inn unit, the country's biggest budget hotel chain.

Motel168 and Morgan Stanley both declined to comment.

CATCH-UP

Motel168 operates around 50 budget hotels, mostly in rich provinces and cities in eastern China.

China attracted 124 million visitors and earned $33.5 billion from tourism last year, according to official data, making the hotel sector one of the hottest destinations for foreign funds.

Budget accommodation in China was dominated until the mid-1990s by notorious government-run "guest houses", many of which paid little attention to cleanliness or convenience.

"There is no solid market leader in the budget hotel sector, as budget hotels are still a new concept in China," said another source familiar with Motel168's IPO plan.

China's biggest budget hotel chain, Jinjiang Inn, backed by the Shanghai city government, operates around 150 hotels across the country and aims to increase the number to at least 200 by 2008.

"Motel168 plans to build 30 to 40 new hotels annually in the next few years," Motel168 said in statement posted on its Web site (www.motel168.com).

Hotel management sources said Motel168 would give priority to Shanghai for its business expansion, partly because its parent company has close relations with the city government, the host of the World Expo 2010.

Merrylin, a household name in Shanghai, became a tourism services giant after a series of acquisitions and expansion that started in the early 1990s. The company started as a small Chinese restaurant in downtown Shanghai. (Additional reporting by Wei Gu in Hong Kong)