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Thu 12 Mar 2015 09:02 AM

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Dubai Police probe Middle East links to bitter legal battle for control of London hotel group

Exclusive: Investigation centres on alleged illegal activity relating to a failed bid to sell London hotels Claridge’s, the Connaught and the Berkeley to Gulf investors in 2011

Dubai Police probe Middle East links to bitter legal battle for control of London hotel group
(Getty Images)

Dubai Police is investigating claims of alleged illegal activity relating to attempts to sell one of the world’s most famous hotel companies to Gulf investors back in 2011.

The investigation is expected to conclude this month, with criminal proceedings launched afterwards if the police decide there is a case to pursue.

The investigation pertains to the alleged unauthorised dissemination of information on Maybourne Hotel Group, which owns luxury London hotels Claridge’s, the Connaught and the Berkeley (pictured below) and had an enterprise value of at least £900 million ($1.353 billion) in 2011, according to court documents.

It is alleged that confidential financial information on Maybourne was passed by one of the group’s shareholders to a real estate broker in Dubai for the purposes of marketing and as part of attempts to secure debt financing for a future sale.

Investors in Coroin, Maybourne’s holding company, have been embroiled in a bitter legal battle since 2010 over ownership of the five-star hotel portfolio. Just one of around eight legal actions has completed – in the UK Supreme Court in 2013. There is currently one action ongoing in London, three in Dublin and another two due to commence in the Irish capital in the coming weeks.

However, the Dubai police investigation is the first time there has been the potential for litigation over the matter in the Middle East.

It is alleged that Irish property investor Derek Quinlan, who holds a 35 percent stake in Coroin, formed links with a Dubai-based broker acting for Gulf investors in 2011 when he was looking to sell his shares.

The broker and Quinlan courted several parties, it is alleged, and, in particular, attempted to work up a sale to a high profile Abu Dhabi investor. During that process, confidential information on the Maybourne hotels business was allegedly circulated to a broker in Dubai and two other men who worked for Barclays Bank in the UAE at the time.

No sale to a Gulf investor was ever consummated, but it is alleged that the same bankers later facilitated a £660 million ($1 billion) debt facility to enable the billionaire British Barclay brothers – who own UK newspaper the Daily Telegraph – to unsuccessfully attempt to acquire a stake in Coroin by trying to buy the debt associated with it. Coroin has now refinanced itself out of this debt.

It was the brothers’ subsequent attempt to acquire 64 percent of Coroin by buying the holding companies that owned the shares in the business, rather than the shares themselves, which prompted majority shareholder, Irish businessman Paddy McKillen, to launch the spate of legal action that is still ongoing.

It is alleged that, had confidential information on the lucrative hotels not been circulated (allegedly unlawfully) in Dubai, Barclays Bank would never have underwritten such a large sum of debt for the Barclay Brothers and they would never have been able to attempt to acquire a majority stake in the Maybourne Hotel Group.

However, there has been no complaint from Coroin of any alleged unauthorised dissemination of financial material. Also, the July 2013 judgment in the Supreme Court appeal case brought by McKillen stated that all parties had been guilty of such “improper” disclosures throughout the years of their business association, not just in 2011.

The judgment said: “There was a significant amount of cross examination of the respondents and their witnesses as to alleged improper disclosure of confidential information of the company.

“In due course it transpired that the unauthorised disclosure of confidential information was endemic among all the shareholders, including Mr McKillen.”

It is understood that Quinlan was summoned to Dubai for questioning but managed to negotiate an agreement with Bur Dubai Police whereby they spoke to his UAE legal representative instead.

A source close to the Dubai Police investigation told Arabian Business that police files have been passed to Dubai Public Prosecution to decide whether or not to take legal action.

A spokesman for Dubai Police said he had no knowledge of any pending investigation of this matter.

All other parties declined to comment.

As it stands, McKillen owns 37 percent of Coroin, while the Barclay brothers own 28 percent via a company they own named Misland. Quinlan holds a 35 percent stake but has set up an arrangement with the Barclays whereby they control his voting rights on the board.

Earlier this month, it was reported that Abu Dhabi’s sovereign wealth fund, Abu Dhabi Investment Authority (ADIA), had launched a $2.5 billion takeover bid for Maybourne, which would put an end to the bitter ownership battle.

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