French hospitality firm Accor has bought US economy hotel chain Red Roof Inns for $1.1bn. The deal makes Accor the world’s third largest hotel company.
Investors including Red Roof’s majority shareholder Morgan Stanley Real Estate Fund were paid $22.75 per share. Morgan Stanley had a 68.3% stake in the company. The offer price represents a premium of 27.5% over the Red Roof’s 30 day average trading price of $17.85 per share. The deal sees Red Roof pay around $613m for the company, with the remainder of the $502m being used to take on the company’s debts. It is being financed with $325m in cash and $790m from existing credit lines.
Red Roof has a network of 322 hotels, some on a franchise basis, located in the Midwest, the East and in the South of the US. Accor intends to group together its Motel 6 brand and Red Roof Inns in a newly formed group Accor Economy. In the US it will now control 10% of the economy lodging market.
Jean-Marc Espalioux, chairman of the management board and cheif executive office of Accor, said: “The acquisition of Red Roof fits with one of the key elements of Accors global strategy, the strengthening of Accors worldwide leadership in the economy hotel sector. The economy sector is promising in both developed and emerging nations, is highly profitable and is less sensitive to economic cycles than other hotel sectors.”
Accor now operates 2,098 economy sector properties through the Formule 1, Etap Hotel, Motel 6 and Red Roof Inns brands.
JP Morgan advised Accor while Morgan Stanley advised Red Roof.
