Carlyle Group LP, the second-biggest private-equity firm by assets, agreed to buy Chinese budget-hotel operator 7 Days Group Holdings Ltd. in a sweetened deal valued at $688 million.
Carlyle is joining Sequoia Capital and Actis LLP to pay $13.80 for each U.S. share for the Guangzhou, China-based company, a 3.2 percent premium to yesterday’s closing price and a 31 percent premium to the closing price on Sept. 25, the day before 7 Days received the original buyout offer at $12.70 a share. The buyer group received $120 million in bank financing to help fund the deal, which is expected to close in the second half of the year, the companies said in a statement today.
“China is now booming,” William Conway, Washington-based Carlyle’s co-chief executive officer, said last week on a conference call after the firm reported earnings. “China not only didn’t experience a hard landing, but it’s arguably experiencing a late-year boom and the central banks continue to promote a world awash in liquidity.”
Carlyle’s latest Asia-dedicated buyout fund shows Conway’s enthusiasm, with seven of its 10 investments in mainland China, including a 49 percent stake in Mandarin Hotel Holdings Ltd., and one in Hong Kong, according to the firm’s website. The $2.6 billion fund, which will make the investment in 7 Days, was generating a negative 2 percent net internal rate of return and a multiple of invested capital of 1.1 as of Dec. 31, according to Carlyle’s most recent earnings report.