Club Med enters China with Melco unit deal
French luxury holiday operator Club Med plans to open its first property in China at a northeastern ski resort just as casino investor Lawrence Ho Yau-lung sells down his stake in the resort's financially troubled owner, Melco China Resorts.
Club Med signed a management agreement with Toronto-listed Melco China to take over two hotels totalling 288 rooms at the popular Sun Mountain Yabuli ski resort in northeastern Heilongjiang province, the companies announced this week.
The deal marks a long-awaited entry to the mainland market for Club Med, which began business in 1950 on the Spanish island of Mallorca and today operates 75 properties in 40 countries.
In 1993, the company announced plans to open a tropical resort on southern Hainan Island complete with an 18-hole golf course, a marina and a casino.
But gambling had not been legalised on the mainland, and that deal fell through along with several others after the central government heard of Hainan's plans.
The agreement with Melco China - which for now remains a unit of Ho's Hong Kong-listed Melco International Development - calls for Club Med to inject up to US$3 million to improve facilities at the resort's hotels, which opened early last year. Melco China will continue to operate the skiing facilities at Yabuli, as well as a 20-room mountain-top hotel.
The Club Med announcement comes just two weeks after financially troubled Melco China revealed that Melco International is selling down its stake via a private placement to a company controlled by mainland businessman and academic Mao Zhenhua.
After completion of the 96 million yuan (HK$109.2 million) equity placement, Melco International's interest in Melco China will drop to 28.7 per cent from 49.3 per cent.
Wisecord Holdings, a private firm controlled by Mao, will have 49.4 per cent control of the resort operator and will be entitled to appoint most of the company's board.
Melco China has lost money every quarter since Melco International spun it off via a back-door listing in Toronto in May 2008. It has divested other resorts and abandoned the purchase of the Sky Mountain Beidahu ski resort in Jilin province last year after it was unable to find the funds.
Mao is the chairman and chief executive of mainland ratings agency China Chengxin Credit Management and also serves as a co-director of Renmin University's Institute of Economic Research.
Six months after completion of the sale, Wisecord will change the name of the ski resort developer and will no longer be permitted to use the name Melco or its Chinese equivalent.
