Accor SA, Europe’s largest hotel operator, agreed to sell the Motel 6 U.S. budget-hotel chain to Blackstone Group LP for $1.9 billion to cut debt and focus on more profitable businesses. The French company’s shares rose the most in more than six months.
Blackstone’s Real Estate Partners VII fund will also acquire the Studio 6 chain of extended-stay economy hotels, Paris-based Accor said in a statement today. The chains operate 1,102 hotels across the U.S. and Canada with more than 107,000 rooms.
Accor Chief Executive Officer Denis Hennequin is pulling the company out of the U.S. budget lodging market and focusing on the more profitable Sofitel and Novotel hotel brands in North America. The proceeds of the sale will reduce the company’s net debt and lease liabilities by 855 million euros ($1.09 billion) while funding expansion, particularly in Asia.
“This deal will provide Accor with additional resources to address the tremendous growth potential in the Asia-Pacific region, in Latin America and in Europe,” Hennequin said in the statement.
The deal is the largest in the U.S. lodging industry since the $3.93 billion acquisition of Extended Stay America Inc. in 2010, which also included Blackstone. The chain was bought through a bankruptcy restructuring by a group that also included Centerbridge Capital Partners LLC and Paulson & Co. Blackstone, owner of the Hilton International chain, purchased U.K.-based Mint Hotels in a $950 million deal announced in September.
Accor gained as much as 8.4 percent in Paris trading, the biggest intraday gain since Nov. 3. The shares were up 6 percent at 26.06 euros at 10:38 a.m.
“This is definitely positive,” Bruno de la Rochebrochard, an analyst at Bryan Garnier, said in a note to investors reiterating his buy rating on Accor’s shares. It will reinforce the “asset light” profile of Accor, where 55 percent of rooms are managed under contract rather than owned, he said.
Accor acquired a controlling stake in the Motel 6 chain in 1990 as part of a debt-fueled international expansion by Paul Dubrule and Gerard Pelisson. The pair founded the company in 1967 with one hotel in Lille, France.
Hennequin is expanding Accor through franchises and management contracts rather than buying more real estate. The company said today it will book a one-time loss of 600 million euros relating to its purchase of fixed-lease hotels.
Accor would have reported earnings before interest and tax equal to 9.2 percent of revenue last year if it didn’t own the U.S. chains, the company said. The reported margin for 2011 was 8.7 percent.
The transaction is scheduled to be completed in October.
Blackstone announced 38 acquisitions in the past 12 months with an average deal size of $707.5 million, according to Bloomberg data. The largest was the $3.01 billion purchase of Emdeon Inc. announced in August.
Blackstone plans to invest “significant capital in the company’s properties and to accelerate the expansion of the franchise base,” Global Head of Real Estate Jon Gray said in the statement.
In the U.S. lodging industry, there were 101 acquisitions announced in the past 12 months with an average premium of 60 percent at the announcement, including net debt, according to data compiled by Bloomberg. The median deal paid 8.5 percent of the target’s earnings before interest, taxes, depreciation and amortization.
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