Accor, Europe’s largest hotels group by number of rooms, has sold its underperforming Motel 6 chain of US budget hotels to Blackstone in a $1.9bn deal, and will use some of the net €330m cash proceeds to expand in emerging markets.
The disposal accelerates Accor’s “asset-light” strategy of selling property assets and operating hotels as a franchisee or on management contract.
Denis Hennequin, chairman and chief executive, said: “Motel 6 has a model that was not suited to the group and had no synergies with our other activities.”
Motel 6 comprises 1,102 hotel and 107,000 rooms – equivalent to 20 per cent of Accor’s total. Some 48 per cent of Motel 6 hotels are either owned or on fixed leases, compared with 23 per cent for the group.
Simon Champion, analyst at Deutsche Bank, said the deal was transformational. “It completes the group’s exit from US budget hotels, which has been a drag on group earnings for two decades,” he said.
“It frees up the balance sheet as Accor now gets rid of the €92m of annual lease costs. And so this is a critical point in the group’s move to divest assets.”
Motel 6 swung into profit last year, with earnings before interest and tax of €15m – 3 per cent of the total – and an ebit profit margin of 2.8 per cent, well below the 8.7 per cent for the group.
The $1.9bn will be paid on completion of the deal, expected to be in October. But before that, Accor will pay $1.4bn to buy out a large number of fixed leases in order to deliver the chain unencumbered to Blackstone. That will leave Accor with €330m cash, after costs, roughly in line with expectations.
Accor bought Motel 6 in 1990 for $1.3bn. The fixed lease buyout will result in an accounting loss of €600m, to be taken in the second half of this year after completion.
The disposal will raise expectations of an exceptional dividend to shareholders, which Sophie Stabile, finance director, said was one option, in addition to renovation and acquisitions.
Mr Hennequin said the deal gave the hotelier “additional resources to address the tremendous growth potential in the Asia-Pacific region, in Latin America and in Europe”.
He spoke on the day the group’s €195m acquisition of Mirvac, the chain of 48 hotels in Australia and New Zealand, closed.
Blackstone, a US private equity group, which specialises in real estate and already owns Hilton Hotels Corp, La Quinta Inns & Suites, and Wyndham hotels, said Motel 6 would be operated on a standalone basis.
“We plan to invest significant capital in the company’s properties and to accelerate the expansion of the franchise base,” said Jonathan Gray, Blackstone’s head of real estate.
The disposal will leave Accor in the US with its Novotel mid-market brand and Sofitel upmarket brand of hotels.
The shares rose 5 per cent in a flat market. Citi was lead adviser to Accor.