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Merger creates hostel giant

Merger creates hostel giant

A merger currently underway between Base Backpackers and ACB Holdings will create a 3,000-bed chain of backpacker hostels, the largest network of privately owned hostels in Australasia. The…

A merger currently underway between Base Backpackers and ACB Holdings will create a 3,000-bed chain of backpacker hostels, the largest network of privately owned hostels in Australasia. The merger is expected to be completed over the next week, said Holding Redlichs Sydney corporate partner David Walker, who is acting for Base Backpackers.

The merged entity, Recreational Tourism Group Pty Limited, will be based in Sydney. Their 11 hostels, 10 bars and 34 travel outlets are expected to initially generate revenues of more than $50 million a year.

Base Backpackers, which is owned through a unit trust, is based in Sydney and owns and manages hostels in Australia and New Zealand. The principal unit holders are Accor Asia Pacific, advisory firm Babcock and Brown and investment group Ivany Investments. Auckland-based ACB Holdings, trading as Beyond Backpackers, operates across the Tasman, and is principally owned by private equity manager Ironbridge Capital.

The merger required restructuring the ownership and commercial relationships between the parties to reflect the change in ownership and direction.

Walker said the different corporate structures of the two organisations added to the complexity of the transaction, saying it took much longer and involved a more complex documentation process than anyone had anticipated.

“Merging a trust and a company as equals is complex enough in Australia,” he said. “Added to that, the two organisations were based in different countries, with different tax regimes. So it wasn’t a vanilla transaction.”

The merger was driven by sophisticated investors, used to driving investment strategies. “Getting everyone into the same space at the same time was a very interesting challenge,” said Walker. “A key element in the negotiations was finding common ground.” New CEO of the merged group, John Osborne, acted as mediator between the two shareholder groups.

Walker said that the size of hostel networks is everything. “To maximise this business, you need to be able to offer backpackers accommodation within a group as they travel from one location to another. The merger will enable the new Sydney-headquartered merged entity to more rapidly grow its network in Australasia, and expand the range of facilities and services it offers backpackers.”

Walker is assisted by Holding Redlich partner Ralph Noldan and solicitor Luke Lizzio. Andrew Robinson from New Zealand firm Russell McVeagh assisted on NZ-specific due diligence. John Strowger and Tim Tubman from New Zealand firm Chapman Tripp is acting for ACB, while David Allen at Baker & McKenzie is Australian agent for the company.

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