These Two Companies Are Reportedly Considering A Merger To Become The Biggest Hotel Operator In The World

TOPLINE
With the worldwide tourism business onerous hit by the coronavirus pandemic, French lodge firm Accor is contemplating a possible merger with British rival InterContinental Motels—a transfer which might create the most important lodge group on this planet, each day newspaper Le Figaro reported.

Shares of each Accor and InterContinental Motels rallied on Thursday.

Eric Piermont/AFP through Getty Photos

KEY FACTS

Shares of each corporations rallied on the information, with Accor rising over three% and InterContinental by practically 2%.

A merger would imply Marriott would now not be the most important lodge firm on this planet—InterContinental and Accor would have 1.6 million rooms, Reuters stories, in contrast with Marriott’s 1.three million.

Based mostly on present market costs, a mixed agency would have a market worth of about $17 billion, merging Accor’s 5,000 properties—together with Raffles, Sofitel and Ibis—with InterContinental’s nearly 6,000 resorts, which incorporates manufacturers like Vacation Inn and Crowne Plaza.

Though Accor has not made any formal method, its administration board is seemingly in favor of a deal, Le Figaro reported, with out naming sources.

However Accor chairman and CEO Sebastien Bazin—who arrange an inside process pressure in June to look at a possible merger—is cautious about transferring ahead and Accor is but to contact InterContinental, the French each day newspaper mentioned.

An Accor spokesperson instructed Reuters that the corporate doesn’t touch upon market rumors, whereas InterContinental has but to reply to the information.

Key background
Shares of each corporations have been onerous hit because the coronavirus pandemic wreaked havoc on the worldwide journey business, forcing many lodge operators to briefly halt bookings, make jobs cuts and shore up their funds. Accor’s inventory has slumped greater than 40% in abroad buying and selling thus far this yr, whereas InterContinental, which trades on the New York Inventory Alternate, is down over 23%. What’s extra, Accor was not too long ago downgraded to junk standing by S&P World earlier this week, which means that the corporate now faces increased curiosity funds.
What to observe for
A merger might make geographical sense for the 2 corporations, since Accor’s household of manufacturers is extra skewed towards Europe however InterContinental has bigger operations within the U.S. and is a rising presence in China, in keeping with Reuters. It will additionally supply substantial value financial savings, resembling on headquarters bills, reservation methods and loyalty packages, Le Figaro’s report mentioned.
Chief critics
A mixture of the 2 corporations would nonetheless be an immensely complicated deal based mostly on the sheer measurement of their operations, Bernstein analysts mentioned in a current word. What’s extra, a deal would have made extra sense when shares of InterContinental bottomed out earlier this yr, however now has much less advantage given the inventory’s rebound, the analysts wrote. Accor could be higher off concentrating on the “near-free progress” that comes from placing offers with lodge homeowners to rebrand current properties, they mentioned. “This is not going to assist the investor notion that Accor administration is not going to keep on with its natural progress/simplification technique and can proceed to search for large offers.”

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