Shareholders approve AccorHotels’ purchase of FRHI
 
Shareholders approve AccorHotels’ purchase of FRHI
12 JULY 2016 10:33 AM

The $2.9-billion acquisition was approved by shareholders, and now the company is ready to execute on its next steps, which will include a new focus on the luxury segment. 

PARIS—AccorHotels Group’s growing footprint just got larger, with the announcement today that the company’s $2.9-billion acquisition of FRHI Holdings Limited was approved by shareholders.

“Today is a great day for our group. The acquisition of these three emblematic luxury hotel brands is a historical milestone for AccorHotels. It will open up amazing growth prospects, lift our international presence to unprecedented heights, and build value over the long term,” said Sébastien Bazin, chairman and CEO of AccorHotels, in a news release.

The company also named former FRHI President and COO Chris Cahill to the newly created position of CEO of AccorHotels’ luxury brands.

Bazin said on a webcast Tuesday that with the acquisition finalized, the company is in position to move forward on combining the companies and leveraging the strengths of each.

“The second step is really that of execution, by rolling out a number of decisions,” he said, based on a French-to-English translation provided in the webcast. “That period will last for about 10 months. … The dilution will be over the (earnings per share) will be accretive for 18 months plus one day after (12 July).”

In December, the Paris-based AccorHotels announced the deal to acquire FRHI and its Fairmont, Raffles and Swissôtel brands from Qatar Investment Authority, Kingdom Holding Company of Saudi Arabia and Oxford Properties, an Ontario Municipal Employees Retirement System company.

Following the approval of shareholders at AccorHotels’ general shareholders meeting Tuesday, the transaction with Qatar Investment Authority and Kingdom Holding Company of Saudi Arabia provided a €768-million ($840 million) cash payment and the issuance of 46.7 million AccorHotels shares in consideration for the contributed FRHI shares. The transaction gives Qatar Investment Authority and Kingdom Holding Company respective stakes of 10.4% and 5.8% in AccorHotels’ share capital. Each of those companies will sit on AccorHotels’ board of directors.

Companies at a glance
When the deal was first announced in December, FRHI’s three brands included 115 hotels and 43,000 keys across 34 countries, with 40 hotels in the pipeline. The vast majority of the properties are operated under long-term management contracts. Six hotels are leased and one is owned. The Fairmont and Raffles brands are in the luxury segment, while Swissôtel sits in the upper-upscale segment.

AccorHotels had 3,900 hotels and more than 500,000 guestrooms in its portfolio of 15 brands at the end of the first quarter of 2016, operating 31% under franchise agreements and 69% under management contracts.

Bazin said on today’s webcast that FRHI still will operate an office in Toronto, with company headquarters remaining in Paris.

New attention to luxury
In his newly created role as the group’s CEO, Cahill will lead the FRHI integration process and be responsible for the strategy and global operations of AccorHotels’ luxury brands. This new structure will include Raffles, Fairmont, Sofitel Legend, So Sofitel, Sofitel, MGallery by Sofitel, Pullman and Swissôtel.

Cahill served as president and COO of FRHI from 1993 to 2012, and most recently served as EVP of global operations for Las Vegas Sands Corporation.

Bazin said on the webcast that while AccorHotels recognizes the demand for top-tier hotel products among affluent customers, it will not neglect growth in what he called “the strength of the group” in the economy and midscale segments.

“We will remain the unchallenged leader in the economy (and) midscale segment, which is precisely the segment that addresses … both domestically and internationally,” he said. “It is not because Accor decides to do a $2.9-billion acquisition that we are going to leave aside what’s been the strength of this group.

“Before signing a check for $2.9 billion, we asked the right questions. We see the affluent customer segment is rising, and it is also the most loyal to the brands to which they are attached.”

AccorHotels’ growth trajectory
Growth and portfolio diversification has been a key initiative for AccorHotels. In April, the company purchased alternative accommodations provider Onefinestay, and in late 2014 it acquired a 35% stake in design-led boutique chain Mama Shelter.

Global growth is a big focus for the company’s HotelInvest ownership and investment division. In January, the company struck a deal to obtain a 10.8% share in Chinese hotel firm Huazhu Hotels Group, and earlier this month it announced the sale of an 85-hotel portfolio.

Closing details and next steps
According to the news release, AccorHotels plans to generate approximately €65 million ($72 million) in revenue and cost synergies thanks to the combination of brands, the maximization of hotel earnings, the increased efficiency of marketing, sales and distribution channel initiatives, and the optimization of support costs. Significant enhancements will also be made in terms of customer data, thanks to the integration of FRHI’s customer base that includes 3 million loyalty members, 75% of which are in North America.

AccorHotels will release its first-half 2016 financial results on 28 July.

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