Mitsui Fudosan to buy 33 pct of Imperial Hotel

TOKYO, Sept 28 (Reuters) - Mitsui Fudosan Co (8801.T: Quote, Profile, Research) said on Friday it would buy a 33.16 percent stake in Imperial Hotel Ltd (9708.T: Quote, Profile, Research) for 86.2 billion yen ($748.2 million), fuelling further competition in the Tokyo hotel market.

Mitsui Fudosan will buy 9.85 million shares of Imperial Hotel, Japan's fifth-largest domestic hotel chain operator, from transit services provider Kokusai Kogyo Co, whose parent company is U.S. investment fund Cerberus Capital Management LP.

Under the deal, Mitsui Fudosan will offer 8,750 yen per Imperial Hotel share, a 10 percent premium to Friday's closing price.

Mitsui Fudosan President and CEO Hiromichi Iwasa said the value reflects the assets held by Imperial Hotel and the potential of redeveloping the Hibiya area in Tokyo where the Imperial Hotel's main hotel is located and Mitsui owns some buildings.

"We are confident that the investment amount is good enough to get a healthy return," Iwasa told a news conference. Iwasa also said his company has no plan to increase its stake in Imperial Hotel.

Both companies will also cooperate on hotel and resorts facilities, although Imperial Hotel's President Tetsuya Kobayashi said no concrete plans have been drawn up yet.

Imperial Hotel directly operates four hotels and one rental apartment building in Japan.

With Japan's ageing society and a pick-up in tourism, Mitsui Fudosan has been expanding its hotel business. Earlier this year it said it would buy some resort hotels from Yamaha Corp (7951.T: Quote, Profile, Research).

Rivals are also gearing up for hotels. Mori Trust Co, an unlisted major property firm, and KK DaVinci Advisors (4314.OJ: Quote, Profile, Research) have obtained preferential rights to purchase the Toranomon Pastoral Hotel in central Tokyo with a 230.8 billion yen bid, the biggest this year for a single property, the Nikkei said on Friday.

Imperial Hotel, founded in 1890, has had a strong presence in the Tokyo hotel market, hosting a wide range of guests from royalty to movie and sports stars such as Charles Chaplin and Babe Ruth.

But the hotel is now under pressure as Tokyo is seeing a rush of high-end foreign hotel openings. Following the arrival of the Mandarin Oriental Tokyo and Conrad Hotel in the last few years, Ritz-Carlton Resorts and Hotels and the Peninsula Hotel opened this year.

Imperial Hotel posted a 28.7 percent drop in group net profit to 1.33 billion yen for the year ended in March while sales grew 3 percent to 57.06 billion yen.

Prior to the announcement, shares in Mitsui Fudosan closed down 0.6 percent at 3,190 yen, while Imperial Hotel was up 3.0 percent at 7,930 yen. The benchmark Nikkei average (.N225: Quote, Profile, Research) was down 0.3 percent.