The company will spin off its hotels and prepaid services divisions into separate, listed companies in an effort to grow the businesses.
INTERNATIONAL REPORT—Accor SA’s board of directors voted Tuesday to break apart its hotels business and prepaid services division.
“The demerger would create a new, solid sustainable growth dynamic for both businesses, each of which is a global leader in its respective business,” board chairman Gilles Pelisson said. “It would also serve as a growth driver for both hotels and prepaid services, offering employees the opportunity to take part in two new entrepreneurial adventures, both of which have bright futures ahead of them.”
Accor’s hotels division operates 4,000 hotels and 500,000 rooms in 90 countries. Among the company’s 13 brands are Motel 6, Sofitel, Mercure and Novotel.
Michelle Chang, a Morningstar analyst who follows Accor, said the decision will bring about benefits for Accor.
“It helps them focus on each part of the business,” she said. “There was never any overlap there. It helps management focus on running the hotels business.”
Santa Monica, California-based Colony Capital and Eurazeo, a Paris investment firm, together own about 30 percent of Accor’s shares and have been pressing Accor to make changes that will bring about greater shareholder value, according to various media reports.
In a joint statement, the firms said they “welcome” the actions taken by Accor’s Board of Directors.
“Eurazeo and Colony Capital reaffirm their willingness to provide lasting support for the two companies that will result from this separation,” the firms said.
One potential hiccup in this deal could be that the company’s hotel’s business will no longer have access to the cash-rich services division. Chang said this means Accor will likely look to raise money for its hotels operation, likely through sale and leaseback deals.
“It is a way to monetize their hotel assets,” Chang said, referring to the demerger.
Citigroup Global Markets analyst James R. Ainley said a demerger would provide positive results for Accor and its stock price, according to his most recent research note in October.
“Longer term, we believe (realization) of the hotel assets will be a more significant driver of share price upside,” he wrote.
To view Accor's press release, click here.