Nick Wilson

HOTEL-focused Hospitality Property Fund, which listed on the JSE in February, has shelved plans to acquire the entire issued share capital of hotel group City Lodge.

When the possible deal was first announced in April, City Lodge founder and nonexecutive director Hans Enderle said he thought the Hospitality offer was a good one.

But Hospitality said on Friday it had “resolved not to proceed with any proposals relating to the acquisition by Hospitality of City Lodge”.

City Lodge has a market capitalisation of R2,4bn.

Gerald Nelson, MD of Grapnel Property Group, one of the shareholders of the management company of Hospitality, said that when the company made the initial announcement in April it “was an early announcement relative to the process”.

“We needed an early announcement to tell market in order to peg share prices and so we could also engage with City Lodge shareholders and management about furthering negotiations,” said Nelson.

He said that once Hospitality was able to engage with City Lodge management and shareholders they were unable to reach a deal which would have “satisfied all parties, including Hospitality, City Lodge shareholders and City Lodge Management”.

Hospitality has a property portfolio worth just over R1bn.

Nelson said Hospitality had a “pipeline” of property acquisitions it was considering and would pursue in the short term.