Octaviar offloads Stella to wipe out legal action Nick Nichols,...

Octaviar offloads Stella to wipe out legal action
Nick Nichols, business editor

July 3rd, 2009

OCTAVIAR has cast itself adrift from Stella Group in exchange for a halt to legal action brought by its joint-venture partner CVC Asia Pacific.

The stricken Gold Coast company on Wednesday signed over its 35 per cent stake in Stella to majority owner CVC Asia Pacific, a deal that completes the private equity group's full takeover of the global tourism giant.

CVC bought into Stella in February last year, paying Octaviar (then known as MFS) $409 million for 65 per cent of the business.

The deal was struck amid the heated fallout of MFS's financial collapse.

But relations between the companies soured when CVC earlier this year launched a warranty claim against Octaviar seeking $249 million compensation for selling it a 'lemon'.

Rosy forecasts by MFS before the purchase failed to materialise, with Stella's parent company Global Voyager Holdings, weighed down by heavy finance and restructure costs, slumping to a $42.7 million net loss in the 2008 financial year.

The pre-tax profit of $17.2 million was well down on the $210 million forecast by Stella, a global tourism empire pieced together by MFS founder Michael King at a cost of more than $2.4 billion.

CVC's original warranty claim against Octaviar has nearly tripled to $625 million since January.

Octaviar administrators John Greig and Nick Harwood, of Deloitte, negotiated the settlement deal with CVC, indicating they may not have been confident of successfully defending the claim.

Neither administrator could be contacted for comment yesterday.

While CVC Asia Pacific has agreed to assume the 35 per cent Stella stake as settlement for its warranty claim, it is understood also to have paid $3.2 million in cash to Octaviar as part of the agreement.

Insiders at the Surfers Paradise-based Stella, which owns a big slice of the Gold Coast's management rights market, have expressed their delight at the full takeover by CVC Asia Pacific.

"It removes a lot of uncertainty around the business," said one source, who declined to be named.

CVC Asia Pacific would not comment on the deal.

Octaviar's chief executive Craig Chapman yesterday could not shed much light on the sale agreement.

"It's just part of the deed of company arrangement and the selldown of various assets," he said.

The buyout could take up to two months to complete and has to be approved by the Foreign Investment Review Board.

Stella Group owns travel agencies Harvey World Travel, Travelscene and Gullivers Travel Group, as well as the Breakfree, Peppers and Mantra Hotels accommodation brands.

Octaviar is undertaking a selldown of all its assets to repay creditors owed more than $1 billion.

One of its few cash cows, the QDeck atop the Q1 tower, was placed in the hands of receivers last month.

Theres your answwer Researcher, CVC paid the staggering sum of $3.2mill for the remaining 35% of Stella. Not bad, they aquired an asset that reportedly cost $2.4billion for $5.12mill. Regards Seamisty