Accor (ACRFY) , Europe's biggest hotel operator, will establish its property unit HotelInvest as a separate legal entity ahead of selling a majority stake in the business which could be valued at more than its €7 billion ($7.75 billion) of gross assets.
Paris-based Accor said the move would enable it to raise cash to pursue more aggressive growth, particularly in the travel and digital sectors, and free the investment business from the constraints of operating as part of a larger group.
"The project would enable HotelInvest to initiate a new phase of dynamic growth, by consolidating its existing asset portfolio through renovations, extensions and repositioning, expanding its network through acquisitions and hotel construction, and implementing as assertive asset turnover strategy," Accor said in a statement.
HotelInvest was created in 2013 as part of an overhaul of Accor's business that split the property unit from the operating and franchising operation, which was dubbed HotelServices. HotelInvest has since grown its gross assets from €5.5 billion to €7 billion, while its earnings of €973 million in the first quarter of this year accounted for about 83% of Accor's total earnings of €1.16 billion and about 51% of its total Ebit in 2015.
A valuation of about €7 billion for the new unit would equate to a enterprise value-to-Ebitda multiple of 10.6 times based on 12-month trailing figures, slightly below industry rivals Host Hotels & Resorts Inc. HST and LaSalle Hotel Properties LHO, noted Goldman Sachs analysts.
"We see the potential spin-off of HotelInvest as a key catalyst for Accor's shares," wrote Goldman Sachs' Monique Pollard. "Accor's steps to simplifying its business could also increase the likelihood it takes part in M&A within the sector."
Goldman Sachs has a 12-month price target of €42 per share for Accor. The hotelier's shares traded Wednesday in Paris at €39.25, up €1.64 or 4.4% higher than their Tuesday close.
Accor expects HotelInvest to attract attention from French and international institutional investors, but is unlikely to open investment in the business to the wider public through a listing for at least five years, Chairman and CEO Sebastien Bazin told reporters on a call.
News of the plan to establish HotelInvest as a separate entity came on the same day as Accor's shareholders approved the group's cash-and-stock acquisition of FRHI Holdings Ltd., owner of the Raffles and Swissotel chains. Accor will pay $840 million in cash and issue 46.7 million new shares to FRHI's owners including the Qatar Investment Authority, Saudi Arabia's Kingdom Holding Co and Canadian pension fund Ontario Municipal Employees Retirement System.
The deal will leave QIA and KHC with 10.5% and 5.8% of Accor respectively, and add 114 hotels to Accor's portfolio, taking its total to 470, not including 175 hotels currently in planning or construction.