KUALA LUMPUR (July 22): Grand Central Enterprises Bhd (KL:GCE), which operates hotels under the Grand Continental brand, said on Monday it has received a buyout offer worth RM90.62 million from its major shareholders as part of a delisting plan.

Tan Chee Hoe & Sons Sdn Bhd and Hotel Grand Central Limited — which together hold a 72.65% stake in Grand Central — are offering 46 sen per share to other shareholders, according to their offer letter. The offer price represents a premium of 28% from the last closing price.

The company has been loss-making and its ageing hotels require refurbishment, it noted.

“We are of the opinion that privatising [Grand Central] will provide us with better flexibility to manage the business and operations, without the need to comply with listing requirements as a public listed company,” said the letter signed by Tan Eng How and Hui Chiu Fung.

Tan is the executive director of Grand Central while Hui represented Hotel Grand Central Limited.

Grand Central has been in the red for the past 10 consecutive years and the company has not declared any dividend since 2019. For the first quarter ended March 31, 2024 (1QFY2024), it booked a net loss of RM3.27 million while revenue declined 14.8% year-on-year to RM4.77 million.

Shares of the usually little-traded Grand Central have remained largely unchanged so far this year and were last traded at 37 sen before the suspension. The company owns five hotels, including the 309-room Hotel Grand Continental Kuala Lumpur, according to its annual report. 

The five hotels owned by Grand Central have an average building age of 31 years and recorded a low occupancy rate averaging 24% between January and May.

“Given the conditions of these hotels, a refurbishment is necessary to maintain standards and attract guests to improve the financial performance” of Grand Central, Tan and Hui said. However, they flagged rising labour costs and goods, as well as new supply and intense competition.

The upcoming performance and earnings visibility would remain “tough moving forward,” they said, adding that the delisting would also cut costs and savings would be ploughed back into refurbishment of the hotels.

Further, Grand Central shares have been thinly traded, with average monthly trading volume of about 180,000 shares for the past one year. Given the limited trading activity, the exit offer also provides opportunity for minority shareholders to immediately realise gains, it said.