MFS to sell 65% stake in StellaReutersAiling property group MFS...

MFS to sell 65% stake in Stella

Reuters

Ailing property group MFS Ltd will sell a 65 per cent stake in its Stella tourism Stellla Group hospitality business to private equity firm CVC Asia

A report in the Australian Financial Review newspaper on Monday said the deal would value the whole of Stella at about $1.6 billion, or some 40 per cent less than the value of Stella about two months ago.

MFS said in the statement on Monday it has requested its shares remain suspended while it completes a strategic review of its remaining financial services business.

CVC had proposed taking a 50 per cent stake in Stella last November, but MFS rejected the deal at the time because of strong travel market conditions.

Shares in MFS, the latest Australian casualty of the global credit crunch, have been suspended indefinitely as it struggles to recapitalise and repay short-term debt due in March.

MFS was forced to restructure after a $1.3 billion ($US1.15 billion) deal to sell its funds management business collapsed and as investors bailed out of its stock on concern about the firm's financial viability. Its shares dived by 70 per cent on January 18.

Its problems follow shopping mall owner Centro Properties' Group's difficulties in extending a tight re-financing deadline for $3.9 billion in debt.

MFS has $220 million in short-term debt maturing by the end of March, out of a total group debt of $1.687 billion.

MFS said it will receive $409 million ($US372 million) from the sale of the majority stake in Stella, and will retain the remaining 35 per cent.

"The proceeds from the transaction will enable MFS to repay its short-term debt obligations and at the same time provide it with the flexibility to manage its commitments into the future," MFS chairman Andrew Peacock said in a statement.

It will no longer consolidate some $905 million of Stella's debt.

Stella operates travel agencies including HarveyWorld Travel in Australia and Global Travel in the UK and runs luxury resorts including Peppers and the Saville hotel group.

The company also said last week that its wholly-owned subsidiary, MFS Investment Holdings No.3 Pty Ltd has entered an agreement to dispose of its interest in Domain Aged Care Group.

"MFS estimates that the profit on the transaction will be in the order of approximately $43.5 million," it said.