Two massive hotel deals are in the works—AccorHotels’ proposed buy of Australia’s Mantra and Singapore-based real estate company* CDL’s full buy of Millennium & Copthorne. Both point to issues of distribution, scale and management experience and show a continuing interest in the sector’s business fundamentals.
GLOBAL REPORT—Two likely pieces of hotel industry business that have come to light on 9 October involving companies in the Asia/Pacific region underline the strong pace and desire for mergers and acquisitions, according to sources close to the bids but not able to speak on the record.
The bids are:
- Singapore-based real estate company* City Developments Limited has made an offer to fully acquire Millennium & Copthorne Hotels for $3.2 billion Singapore dollar ($2.36 billion). CDL issued a news release on the bid Monday morning.
- AccorHotels is pursuing a non-binding takeover of Australian hotel company Mantra Group, according to a statement posted by Mantra to the Australia Stock Exchange and reported by Australian media. The Sydney Morning Herald reports AccorHotels made a $1.2-billion Australian dollar ($932.03 million) offer for Mantra.
Millennium & Copthorne operates and owns 190 hotels in 22 countries under flags Millennium, Copthorne, Grand Millennium and M, and has been listed on the London Stock Exchange since 1996.
City Developments Limited’s parent company, Hong Leong Group Singapore*, already owns approximately 65% of M&C. The deal, if finalized, would mean sole ownership for M&C and thus having its shares delisted.
Mantra, listed on the Australian Securities Exchange, operates more than 20,000 rooms in more than 125 assets in Australia, Indonesia and New Zealand under its Mantra, Peppers and Breakfree brands.
Both deals are subject to regulatory approval and, in the case of AccorHotels’ bid for Mantra, approval from both companies’ boards of directors. The ink is dry on neither, but M&C did publish the above CDL offer as the first step in having shareholders debate the plan.
In the hands of shareholders
Sources close to both said the bids have been discussed for some time and make sense for today’s hotel-industry market of increased distribution and scale.
Among the points and issues raised by the two proposed acquisitions are:
CDL and M&C
- As the major shareholder of M&C already, CDL’s bid is based on a desire to remove costs and make the M&C model more efficient. Marrying management and operating interests will allow CDL to have a fresh look at the entire platform;
- M&C owns most of its assets. In its statement, CDL said it “intends to maintain M&C’s current business model, in particular to run the business as an owner and operator of its hotel portfolio.”
- The statement also says CDL “has no intention to sell or repurpose any of M&C’s hotels in London or in New York.”
- Independent M&C shareholders likely have decided that ownership on that scale presents sufficient structural and cyclical challenges, and that considerable CapEx funds are needed. Both those considerations taken together might have presented a view to independent shareholders that now is the right time for this deal to see fruition.
- Added to that, the “premium of approximately 23.7% to the closing price per M&C share of 446.7 pence on 18 August, 2017,” is a healthy one in this market, insiders said.
AccorHotels and Mantra
- AccorHotels is more corporate-focused, while Mantra is predominantly leisure-focused.
- The strategy behind the move derives from a broader issue of scale, and what scale can deliver. Lately for AccorHotels, that surrounds loyalty and distribution.
- From AccorHotels’ perspective, the deal would enhance its revenue from the existing Mantra platform due to reduced costs via volume discounts.
- Mantra is regarded as having an efficient management platform in the condo-hotel industry, where individual owners own homes. In Australia, such ownership is known as “strata title” ownership; this deal would enhance a new subset of management experience for AccorHotels. In 2012, AccorHotels confirmed the AUS$320 million ($248.5 million) acquisition of Mirvac Hotels & Resorts, also Australian and also in the condo-hotel business. But the Mantra bid is of a far greater scale.
- The bid falls neatly into AccorHotels’ wider plays in terms of recent buyers in leisure and resorts distribution and concierge services.
At the 26-27 September Hotel Investment Conference Europe in London, David Ling, head of strategic development, CDL Hospitality Trusts, while not mentioning the M&C bid, said of M&C that it was a strong brand, which CDL saw no desire to change in any way.
“We’re happy to let its professionals deal with it,” he said.
Ling added that CDL was not rushing into creating new brands but was very aware of the new players entering the market.
*Correction, 9 October 2017: A previous version of this story identified City Developments Limited as a real estate investment trust.
*Correction, 10 October 2017: A previous version of this story misidentified City Developments Limited's parent company.