• Accor denies ‘mega-merger’

AccorHotels said that it had no plans for a ‘mega-merger’ funded by its Booster project, in the wake of ongoing acquisitions at the group.

The company had no further update on the project, other than to confirm that it was in talks with a potential investor and planned to sign an agreement before the end of the year.

In February the group said that it expected the sale to have been carried out by June this year, which had changed to September by the middle of the year. In May the group confirmed that non-binding offers had been received from a “select group of well known investors”, with buyers conducting due diligence. Sources close to Hotel Analyst suggest that the project could now be pushed into the first quarter of next year.

Morgan Stanley has modelled EUR5bn of proceeds from the sale of 70% of Accor’s owned property business with just EUR2bn handed back to shareholders via a share buy-back. Details on how much of the division Accor planned to retain remain scant.

CFO Jean-Jacques Morin would not be drawn on what the group planned to do with the money raised through the sale, telling analysts: “We don’t have anything in the pipe which is a mega merger. As part of our due diligence we…do look at all opportunities as we would do whether Booster happens or not.”

Morin reaffirmed that, after the closing of the Booster operation, the company would stop the elimination of fees between AccorHotels and Accor Invest, which would have translated into a total revenue of EUR649m for the third quarter.

The company’s third-quarter results saw it confirm its agility in the deals market, with four deals since the half-year results, including an agreement to acquire Mantra in Australia.

The brokerage houses were cautious in the face of the results, including Kepler Cheuvreux, which described the group’s Q3 revenue results as below expectations, with growth of 5.6% for new business against 16.4% in the first half. The company explained the fall in part to a failed web strategy at OneFineStay.

Total revenue growth at Accor was up 6.4% to EUR504m on the back of a 4.5% systemwide revpar growth, beneath Morgan Stanley’s forecast of EUR553m. HotelServices like-for-like sales grew by 3.5%, feeling the effect of disposals and renovations.

Morin described the key regions of France, Europe and Asia Pacific as “particularly solid”, with revpar up 5%, 7.8% and 5.9%, respectively. Together, they accounted for more than 75% of the total fee income. Of the remaining territories, the Americas were up 6.4%, but Middle East and Africa was down 3.4% and Latin America fell 12.4%.

The UK saw revpar up 4% over the quarter. Performance was mixed between London (+0.9%), where the occupancy rate edged down, and the regions (+6.6%), with the company commenting that business in most major cities was driven by “staycations” as British holidaymakers opted for domestic stays in the wake of the decline in the sterling exchange rate.

Sébastien Bazin, chairman & CEO, said:  “The positive operating trends observed in our key markets in the first half were confirmed, and early signs of a recovery emerged in Latin America. The group continued its rapid development. In the course of the quarter, our hotel base crossed the symbolic mark of 600,000 rooms and our pipeline reached a record level, reflecting the increasingly strong attractiveness of our brand portfolio, which now includes Orient Express and Nextdoor, and will soon extend to Mantra, BreakFree and Peppers.”

During the period the group opened 11,000 rooms, taking its estate to more than 600,000 rooms, with the company confirming its target to open more than 40,000 rooms by year end. At the end of September, the group’s pipeline comprised 992 hotels and 178,000 rooms, of which 81% was in emerging markets and 47% in the Asia-Pacific region.

The company said that it expected similar revpar trends in the fourth quarter, with full year Ebit in the high range of the EUR460m to EUR480m guidance the company announced in July. Morin said: “We globally expect this solid operating times to carry on in Q4 with some point of attention, Middle East and Africa, London, Catalonia, with the political phenomenon happening since now the last 10 days and the foreign exchange with the Euro currency, which is getting stronger.”

HA Perspective [by Katherine Doggrell]: Earlier this year Bazin was insistent that the Booster project would “be carried out by June this year” and yet summer, such as it was, has now been and gone and there is no more detail other than the not very much at all which we have been staggering on with this year. According to Les Echos, investors looking to buy at least 51% of HotelInvest were due to submit their letters of intent in October.

Impatience is growing. Barclays Capital told clients that it thought the market was underestimating Accor’s growth acceleration potential, which it expected to see change after the partial sale of HotelInvest, while Societe Generale looked forward to the company being “more readable and more profitable” after the sale, proving yet again that brands and real estate don’t mix in the mind of the market.

But, with the portfolio valued at EUR6.6bn, it’s not one to rush into, so we await further tantalising hints at information in the coming weeks.

In the meantime, the company looks set to do more of the same – relatively small strategic deals which come at us out of the left field but make imaginative bolt-ons as the group moves towards its less capital intensive Three Pillars strategy. SocGen was pleased with the broad reach of the company’s brands and, with Accor maintain an open eye, owners are likely to see their options broaden as the weeks go on. As for Accor’s own ownership position, we should not underestimate the company’s fetish for surprise.

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