Will They, Won’t They…Accor & IHG Possible Merger

Main Photo: The logo of French hotel operator Accor as seen on top of the company’s headquarters in Issy-les-Moulineaux near Paris, France.

Date: August 2020

Location: Global

What’s Occurring: Shares in France’s Accor rallied on Thursday after Le Figaro newspaper reported it had examined a potential merger with British rival InterContinental Hotels (IHG)  that would create the world’s biggest hotel group.

The hospitality sector has been hit hard by the coronavirus crisis as travel dwindles, forcing many hotel owners to temporarily halt bookings and shore up their finances.

Le Figaro said no formal approach had been made by Accor, which is behind brands such as Novotel and Movenpick, to IHG, which owns Holiday Inn and Crowne Plaza. Based on current prices, a combined firm could have a market value of about $17 billion.

Should a deal emerge it would create the world’s largest hotel group with 11,000 hotels, which would see Accor leapfrog Marriott International, with 7,000 hotels.

Without citing sources, it added Accor’s management board was in favour of a deal, but Accor chairman and CEO Sebastien Bazin, who had set up an internal taskforce on the matter, was more cautious about moving ahead.

According to a report in Le Figaro, the French newspaper, Accor has instructed Investment banks Centerview and Rothschild to provide advice. JP Morgan and Deutsche Bank are also said to be involved in the process in an advisory capacity.

Accor’s chief executive, Sebastien Bazin, is looking to team up with Colony Capital Europe, which he used to run, according to The Times.

An Accor spokeswoman said the company did not comment on market rumours. IHG declined to comment.

Accor shares were up 1.9%. The company, which faces higher interest payments after it was downgraded to junk status by ratings agency S&P Global earlier this week, has been punished by investors this year, with its shares down over 43% so far.

Shares in IHG, down around 23% this year, were up 0.35% at 0825 GMT after surging as much as 3.1% in early trading, outperforming a falling FTSE-100 index.

A marriage between the two firms would propel them far ahead of U.S. rival Marriott by number of hotel rooms, with over 1.6 million between the two. Accor has 35 or so brands, more than Marriott post-Starwood takeover!

It could also make geographical sense, with Accor and its brands more skewed towards Europe, while IHG has larger operations in the United States and is also growing fast in Greater China.

Both firms have announced job cuts and cost savings plans in recent weeks as they try to cope with the fallout from the pandemic.

THPT Comment: Industry commentators said that Marriott taking over Starwood would never happen…In these post Covid days, who knows…Accor and IHG merger could well happen. Globally there are some 500,000 hotels, so one group owning 11,000 hotels wouldn’t worry the various global monopoly authorities…however Colony Capital might not be quite the right partner at this time.

First Seen: Reuters, based on a story in Le Figaro

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