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Accor To Sell Of Real Estate Unit Sale, Intends To Buy Back Shares With The Resultant Earning

Accor To Sell Of Real Estate Unit Sale, Intends To Buy Back Shares With The Resultant Earning
Following the decision of Accor SA to sell off a major portion in its property business, the hotel operator now is planning repurchase its shares worth up to 1.35 billion euros ($1.65 billion) during the next two years.
A statement issued by the French company recently said that 55 per cent stake of the company was bought over initially by a group of investors that included Amundi SA, Colony NorthStar Inc., Credit Agricole Assurances, Singapore’s GIC Pte sovereign-wealth fund, and Saudi Arabia’s Public Investment Fund, among others. The company intends to undertake regional acquisitions and the buyback with the 4.4 billion euros ($5.4 billion) that it would get in cash from the deal.
“Investors will now focus on the asset-light growth story of the group, which we view as one of the most interesting in the lodging space,” Raymond James analyst Simon Lechipre said in a note. The amount of money that the company had been expecting from the sale of the property unit is just a little less than the actual deal, said Lechipre, who has an outperform rating on the stock.
Operating lodgings and franchising has become the focus for hotel firms which have been selling off their real estate holdings instead. Accor intends to pursue a strategy of expansion in the emerging economies and hence is selling off its assets. Accor is the largest hotel operator of Europe. Australia’s Mantra Group Ltd. was offered to be bought over by the Paris based company in October last year for a deal where the valuation of the Australian hotel and resort operator was pegged at A$1.2 billion ($936 million.) An investor presentation about the latest transaction states that more regional acquisitions is now the focus of Accor.
There was a drop of 2.4 per cent in the shares of Accor in Paris following the news. The shares of the company have increase by at least 10 per cent this year while its closing value on Tuesday was its highest since June 2015.
6.25 billion euros is the enterprise value that has been put on the property unit by the deal. Chief Executive Officer Sebastien Bazin said in the statement that there would be “substantial leeway” to grow more and create value for shareholders provided by the transaction to the French hotel company.
Initially, the remaining stake of Accor in AccorInvest would be brought down to 30 per cent. And Bazin said on a call with reporters that AccorInvest “will have its own life,” after Accor reduces its stake further after a five-year lock-up period.
The statement said that for a period of up to 50 years, AccorINvest hotels would be run and operated by AccorHotels with a provision for renewal.

Christopher J. Mitchell

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