Claridge’s owner removes Paddy McKillen from board in row over stake value

Claridge’s, one of Britain’s most luxurious hotels, is facing a fresh tussle between its owners, seven years after a Qatari royal teamed up with Irish property developer Paddy McKillen to win a fight for control of its parent group.

Constellation Hotels, which is ultimately owned by Sheikh Hamad bin Jassim bin Jaber al-Thani, has pushed Mr McKillen off the board of Claridge’s parent company, Maybourne Hotels, as they argue over the value of a stake in the business that could be worth more than £1 billion (€1.2 billion) to McKillen.

McKillen and his longtime associate Liam Cunningham were removed from the board without warning last weekend, according to two people with knowledge of events.

Neither Cunningham nor McKillen, who has run and renovated the group’s hotels over the past seven years, were at the meeting where the decision was taken, both said.

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Ownership disputes at Maybourne, which owns Claridge’s, the Berkeley and the Connaught hotels as well as sites in Los Angeles and on the French Riviera, have been running since the Barclay brothers, also owners of the Daily Telegraph, launched an attempt to buy Maybourne’s holding company Coroin in 2011, prompting McKillen to fight back and launch what became one of the UK’s most high-profile and expensive shareholder spats of recent times.

Legal battles

The Qataris, through Constellation Hotels, came in to back Mr McKillen, one of the original Coroin owners, allowing him to ultimately fend off the Barclays’ bid after four years of legal battles.

Mr McKillen is due to receive a deferred payout after he sold his 36 per cent stake in the business as part of Constellation’s deal to buy Maybourne for £1.3 billion in 2015, a contract that tied Mr McKillen in to running the hotels until December this year. The value of the payout is due to be decided this month.

According to a person with knowledge of the contract, Mr McKillen is entitled to a payout equivalent to the value of the hotels, less the original £1.3 billion deal value and the value of Constellation’s capital investment to restore the hotels.

Maybourne could be worth more than £5 billion, given the recent recovery in the luxury hotel business as pandemic restrictions have eased, and based on the recent sale prices of similar assets, according to a person close to the two former directors.

A person close to Constellation said it would “honour its obligations”.

When Constellation removed Mr McKillen from the board, it appointed Marc Socker, who has worked in hospitality real estate, and Gianluca Muzzi, a former Deutsche Bank executive, as new co-chief executives of Maybourne without Mr McKillen’s knowledge.

The Qataris are “notoriously tough partners”, said a person close to Mr McKillen. “Paddy is utterly confused. He couldn’t have done a better job of expanding [\AND]refurbishing the hotels.”

In January, Mr McKillen stepped back from running the Beverly Hills and Riviera hotels, stating in a message to staff that he would “no longer be involved in these amazing properties”.

Maybourne said that “new joint-chief executives have been appointed to create a new global ultra-luxury hospitality brand after Paddy resigned from two of our hotels” but declined to comment further.

Claridge’s, which charges £100,000 a night for its penthouse suite following Mr McKillen’s renovation, had the best month of trading in its history last month, according to a person close to the hotel’s management.

The Maybourne board is chaired by Michele Faissola, another former Deutsche bank executive who was among 13 bankers who received jail sentences as part of a probe into the falsification of accounts at the Italian bank Monte dei Paschi di Siena in 2019. Faissola has appealed against that sentence and remains at liberty.

The Al-Thani family are major shareholders in Deutsche Bank. Faissola runs Dilmon, the Al-Thani’s family office. - Copyright The Financial Times Limited 2022