Accor and Mantra do $1.3b deal

Accor and Mantra do $1.3b deal

13 October 2017

Mantra Group has reached agreement to sell all its shares to Accor in a deal worth $1.3 billion that will reshape Australia’s hotel landscape.

The Mantra board told the ASX on Thursday that it had entered into a binding agreement where AccorHotels will acquire all of the shares of Mantra at a price of $3.96 including a potential special dividend, by way of a scheme of arrangement.

The AFR notes that merger of the country’s two biggest accommodation providers would create a local hotel giant with a national portfolio of more than 300 hotels, a dozen or so brands and in excess of 50,000 rooms—about five times bigger than its nearest competitor, franchisor Choice Hotels.

Mantra shareholders will get to vote on the scheme in February (a vote of 75 per cent in favour will likely be needed) with the deal expected to be concluded at the end of March.

In a note, Macquarie Equities analyst Shaun Weick said the deal valued Mantra at a discount to its global peers and could attract interest from other global players including Marriott, Intercontinental Hotels Group (IHG), Choice Hotels or TFE Group.

The approach from Accor, which operates more than 4,100 hotels and almost 600,000 hotel rooms around the world and more than 30,000 rooms in Australia, follows a wave of global hotel company mergers driven by the growth of online booking platform Airbnb and the increased market power of online travel agents such as Expedia and Booking.com.

AccorHotels chairman and CEO, Sebastien Bazin, said: “We have long admired the Mantra business, both in respect of its brands and properties as well as its people and processes.”

Last year’s global $17 billion merger of Marriott and Starwood created the world’s biggest hotel company with around 1.2 million rooms.

Locally, amid a China-led tourism boom, Australia’s hotel sector is booming with occupancy rates near 90 per cent in Sydney and Melbourne, a wave of new brands coming into the country and all the major players undertaking big development pipelines.

Reuters reports that Accor’s deal comes as the country’s hoteliers rush to build extra rooms to meet growing demand. The number of visitors to Australia surged 9 percent in the past financial year to hit a record 7.9 million while spending by international visitors climbed to $40.6 billion—also a record.

Visits from Chinese tourists—who tend to make longer trips and spend more — jumped 10 percent and visitor numbers from Europe and the United States also rose.

Together, Accor and Mantra would own over 300 hotels and about 50,000 rooms. That would give them roughly 11 percent of Australia’s hotel market, according to IBISWorld statistics.

The deal however, would have to pass scrutiny from the Australian Competition & Consumer Commission, says The Australian.

“If the ACCC decides to conduct a public review, details will be made available on our mergers register,” the regulator said.

Deutsche Bank analyst Stuart McLachlan said the deal’s key approval issues included both the Foreign Investment Review Board and the ACCC, given the combined entity’s 20 per cent Australian hotel market share.

The deal joining the French hotel behemoth with local start-up Mantra Group was unlikely to attract a competing bid, Citi Research said. However, it could spark a wave of hotel deals as rival operators try to catch up and some property owners may sell if a better capitalised operator is formed, boosting the value of their sites.

Accor is one of the largest hotel operators in the world. In Australia, it operates the Sofitel, Novotel, Grand Mercure, Mercure and IBIS brands. Its newest asset is the $500 million Sofitel Darling Harbour, which opened last week and already has 60 per cent occupancy.