By RACHELLE YOUNGLAI
Friday, November 10, 2017
One of the three owners of Four Seasons Hotels Inc. has been ensnared in a power struggle in Saudi Arabia, but the luxury brand is strong enough to withstand the fallout from the arrest of Saudi Prince Alwaleed bin Talal, industry experts say.
The billionaire prince is being accused by Saudi officials of money laundering, bribery and extortion.
He is one of dozens of princes and government officials detained in a purported crackdown on corruption, which began with his arrest, among others, on Saturday.
Four Seasons said its business as usual and "this matter does not affect the day-to-day operations."
It's not clear anything will happen with Prince Alwaleed's stake, which he has owned since 2007 when his Kingdom Holding Co. joined forces with the investment firm of Microsoft Corp. co-founder Bill Gates to take a controlling interest for $3.8billion (U.S.), including debt. That was considered a lofty price tag at the time.
The two each hold 47. 5 per cent of the company; Four Seasons founder and chairman Isadore Sharp owns the remaining 5 per cent.
But if Prince Alwaleed's legal troubles cause him to sell, there would be a healthy number of interested buyers, said Curtis Gallagher, a vice-president and hotel expert with commercial real estate firm Cushman & Wakefield.
"It would be a highly attractive investment for the current ownership group or any other investor who would be a potential suitor," Mr. Gallagher said.
"I don't think there is any potential for value loss in the company."
Since the weekend arrests, the Saudi government has questioned more than 200 individuals, frozen assets and shaken up the judiciary system. The upheaval is being described as a way for the heir to the throne to consolidate his power and thwart potential enemies.
The allegations against Prince Alwaleed have not been proven and it is unknown whether his assets have been frozen. But even if they were, experts said this would not affect the hotel's operations.
"There is no reason why the order that freezes somebody's shares in a company will interfere ... with the operation of the company," said George Benchetrit, partner with Chaitons LLP, who specializes in corporate restructurings and commercial litigation.
The Toronto-based hotel company, which manages the operations of about 100 hotels across dozens of countries, is expanding. It recently partnered with an airline to offer guests private flights to Four Sea.
sons resorts. Mr. Sharp predicted in a recent interview with Bloomberg News that the company could eventually double the number of properties. He could not be reached for comment.
Four Seasons is a hotel-management firm, with other investors typically owning the land and buildings.
This includes Prince Alwaleed, who owned the new Four Seasons in Toronto until selling it last year for $225-million (Canadian) to Florida billionaire Shahid Khan. A spokesman for Mr. Khan said the new owner had "no concerns related to the news."
The Prince is the highest-profile person to be swept up in the investigation. The 62-year-old is a wellknown investor in the West, with stakes in Citigroup Inc., Apple Inc., Twitter Inc. and Lyft. He owns his investments through his publicly traded company, Kingdom Holding Co., of which he is the majority shareholder.
His arrest occurred after King Salman ordered the creation of an anticorruption committee chaired by his 32-year-old son, Crown Prince Mohammed bin Salman.
Saudi Arabia's Attorney-General said on Thursday that "at least $100billion has been misused through systematic corruption and embezzlement over several decades." The attorney-general did not provide names.
However, the allegations against Prince Alwaleed are not expected to hurt the Four Seasons brand.
"Who cares who owns it. I won't stop staying at the Four Seasons because he doesn't own it," said Paul Argenti, professor of corporate communication with the Tuck School of Business at Dartmouth.
"This is not going to bring the Four Seasons brand down, it's just not. It would have to be like there are bed bugs in every hotel in the world," he said.
Mr. Argenti said it takes a long time to "wear down a brand," and pointed to Uber, which continues to be used even though the company has been rocked by sexual harassment scandals and been pilloried for its unpopular pricing methods.
Prince Alwaleed bin Talal of Saudi Arabia, seen in the D-Bar of Toronto's Four Seasons Hotel in 2013, is being accused by Saudi officials of money laundering, bribery and extortion.
FRED LUM/THE GLOBE AND MAIL