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Thu, 10 December 2015

AccorHotels to Acquire FRHI Holdings; Fairmont, Raffles and Swisstel

AccorHotels has signed an agreement with the Qatar Investment Authority (QIA), Kingdom Holding Company (KHC) of Saudi Arabia and Oxford Properties, an Ontario Municipal Employees Retirement System (OMERS) company, for the acquisition of FRHI Holdings Ltd (FRHI), parent of Fairmont, Swisstel and Raffles hotel brands.

FRHI has 155 hotels and resorts (of which 40 are under development), and more than 56,000 rooms (of which approximately 13,000 are under development).

Its portfolio includes iconic hotels such as Raffles Singapore, The Savoy in London, Shanghais Fairmont Peace Hotel, The Plaza Hotel in New York, Le Royal Monceau - Raffles Paris, Fairmont San Francisco, Fairmont Banff Springs (Canada), Fairmont Le Chteau Frontenac in Quebec and the Fairmont Grand Del Mar in San Diego.

FRHIs hotels and resorts span 34 countries across 5 continents, with 42 properties in North America, 2 in South America, 26 in Europe, 17 in Africa/Middle East and 28 in Asia Pacific.

The vast majority of hotels (108) are operated under very long-term management contracts, with average remaining terms of nearly 30 years; 6 hotels are leased and 1 hotel is owned.

The company has more than 45,000 employees under its brands.

This is an outstanding opportunity to add three prestigious brands Fairmont, Raffles and Swisstel to our portfolio, and a great step forward for 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, said Sbastien Bazin, Chairman and Chief Executive Officer of AccorHotels. In addition, the deal allows us to strengthen our human capital with FRHIs widely respected and talented global workforce which has a proven track record in operating and marketing luxury hotels. The transaction will also enable the Group to consolidate its shareholder base, with the arrival of two high-profile investors that both have extensive expertise in the hospitality industry. This major acquisition demonstrates the groups agility in a fast-changing industry and will allow us to more effectively support our guests, clients and hotel owners. Through it, we are positioning ourselves as a key player in the current industry consolidation process while maintaining substantial leeway to implement our transformation plan.

The integration of Raffles, Fairmont and Swisstel will broaden the groups geographic footprint in the luxury segment, and enable it to optimize its luxury and upscale brands in order to adapt its offering to the expectations of an increasingly demanding clientele.

AccorHotels aims to generate around 65 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 improvements will also be made in terms of customer data, thanks to the integration of a customer base including 3 million loyalty members, of which 75% are North Americans.

The transaction will be accretive on earnings per share from the second year, with synergies fully effective by the third year.

The agreement with Qatar Investment Authority and Kingdom Holding Company of Saudi Arabia provides for the cash payment of $840 million (768 million at the current exchange rate) and the issuance of 46.7 million Accor shares. These shares will be issued via a reserved capital increase, subject to the approval of shareholders at an Extraordinary Shareholders Meeting. The transaction will leave QIA and KHC respective stakes of 10.5% and 5.8% in Accors share capital. Two representatives of QIA and one representative of KHC will be appointed to the Accor Board of Directors.

His Excellency Sheikh Abdulla Bin Mohammed Bin Saud Al-Thani, CEO of Qatar Investment Authority, said, Since making our investment, Fairmont Raffles Hotels International has become a leading luxury hotel company with an expanded international presence. This deal generates the scale needed to drive the next phase of growth in our real estate and hospitality investments. QIA has confidence in AccorHotels and looks forward to becoming a significant shareholder.

The transaction is subject to the regulatory approvals of the antitrust authorities. Rothschild and Zaoui & Co are acting as financial advisors and Darrois Villey Maillot Brochier and Proskauer Rose LLP are acting as legal advisors to AccorHotels on this transaction. Deutsche Bank Securities Inc. and Morgan Stanley & Co. LLC are acting as financial advisors and McCarthy Tetrault LLP and White & Case LLP are acting as legal advisors to FRHI on this transaction.

Accor, AccorHotels, FRHI, Fairmont, Raffles, Swissotel

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