Accor SA agreed to buy the owner of the luxury Fairmont, Raffles and Swissotel brands for about $2.9 billion in shares and cash.
Europe’s biggest hotel operator will pay 46.7 million new shares and $840 million in cash for FRHI Holdings Ltd., Accor said in a statement on Wednesday. Accor’s buying the company from Qatar Investment Authority, Prince Alwaleed Bin Talal’s Kingdom Holding Co. and Oxford Properties Group Inc.
Paris-based Accor, which operates the Ibis and Sofitel chains, has 3,800 hotels worldwide. FRHI, based in Toronto, has more than 100 high-end hotels, including Manhattan’s Plaza, London’s Savoy and Raffles in Singapore, and 40 under development.
The deal "offers us robust and global leadership in luxury hotels, a key segment in terms of geographic reach, growth potential and profitability," Accor Chief Executive Officer Sebastien Bazin said in the statement. "We are positioning ourselves as a key player in the current industry consolidation process."
Hotel acquisitions are rising as owners and operators attempt to bulk up and defend themselves against competitors such as Airbnb Inc. Investors spent $60 billion on hotels in the first nine months of the year, 37 percent more than a year earlier, according to data compiled by JLL. Last month, Marriott International Inc. inked the biggest deal in the industry since 2007 by agreeing to buy Starwood Hotels & Resorts Worldwide Inc. in a $12.2 billion deal.
QIA and Kingdom Holding will become Accor shareholders, with 10.5 percent and 5.8 percent of the share capital, respectively, according to the statement. The transaction will boost Accor’s earnings per share after two years, with 65 million euros ($71 million) in revenue and cost savings expected to fully take effect by the third year. Accor’s planned share sale is subject to shareholder approval.
"This deal generates the scale needed to drive the next phase of growth in our real estate and hospitality investments," QIA’s CEO Sheikh Abdulla Bin Mohammed Bin Saud Al-Thani said in the statement.
Accor announced the purchase after the French stock market closed. The company’s shares fell 3.1 percent to 38.9 euros, paring the gain for this year to about 4 percent.
Dalia Fahmy and Francois de Beaupuy