French hotel giant Accor has agreed to buy Canada’s FRHI Holdings, parent of the Fairmont, Raffles and Swissotel chains in a deal worth $2.9 billion.
Under the terms of the purchase, Accor will pay $US840 million in cash and issue 46.7 million new shares.
The purchase covers 155 hotels in the three brands including landmark properties Raffles Singapore, The Savoy in London and Fairmont Le Chateau Frontenac in Quebec City.
"This is an outstanding opportunity to add three prestigious brands – Fairmont, Raffles and Swissotel – to our portfolio, and a great step forward for AccorHotels," said Sebastien Bazin, chief executive officer of AccorHotels.
"It offers us robust and global leadership in luxury hotels, a key segment in terms of geographic reach, growth potential and profitability, for long term value creation."
Major FRHI backers Qatar Investment Authority and Saudi Prince Alwaleed Bin Talal will take a seat on the Accor board and own 10.5% and 5.8% respective shareholdings in Accor.
"This deal generates the scale needed to drive the next phase of growth in our real estate and hospitality investments," Qatar Investment Authority CEO Sheikh Abdulla Bin Mohammed Bin Saud Al-Thani said.
Commenting on the announcement, Dr Wouter Geerts, travel analyst-lodging at Euromonitor International, said the price tag is rather high for 155 hotels – compared to Marriott’s scoop of Starwood’s 1270 properties for US$12.2 billion – but it is still a positive development for Accor.
"It will allow Accor to better compete in a competitive landscape which sees increasing pressures from online travel agencies and peer-to-peer platforms, and consolidation amongst competing hotel players," he said.
"While FRHI has some iconic hotels in its portfolio, like the Savoy in London, it is mainly the company’s strength in the luxury segment outside Europe which will have attracted Accor.
"Raffles is a luxury brand mostly based in Asia and the Middle East, Fairmont is very strong in North America, and Swissotel will expand Accor’s luxury offering in Europe while also having a strong pipeline in China.
"Accor’s revenue is heavily reliant on sales from Europe, but since the economic crisis this has been an underperforming region.
"In contrast, Accor’s main competitors are strong in the US and have benefited from a strong performance of the North American hotel market."
