This week’s In Focus saw Alexi and I joined by Tom Oakden of Hilltop Capital Advisors, which gave us a good chunk of time to get stuck into some pontificating about where we were all going in transactions land.
The vaccine has focused the minds of many of those who have been sitting aboard stacks of cash as they get higher and higher, waiting like so many drop bears for the opportune moment to flop down and crush all and sundry in their wake. There are fears that the much-hoped-for gory discounts would vanish amidst all the cheery hope and general good mood. And yes, there is the opinion that those much-wanted 30% to 40% discounts now look more like 15% to 20% discounts and I guess we’re all going to have to choke that down and make the best of it.
And a glorious time of speculation was had by all, safe in the knowledge that, apart from the sale of THE LARGEST HOLIDAY INN IN FRANCE, the sector was lacking in market testing as to what a Covid-19 discount might look like. There are deals on the horizon - Grange leaps smack-up to mind - but nothing sealed, nothing to tip us over into clarity as to what this all means.
And then - and this isn’t the first time this has happened - enter Accor, stage left. Waving, on this occasion, not a done deal, but news that it was entering exclusive negotiations over a joint venture with Ennismore, the hotel management group which brings you, amongst other things, the Hoxton brand.
And it was at this point that it got a bit Adventure Game, a bit Choose Your Own Ending book, which this hack found a trial in her formative years, but which gripped many and helped to spawn a global video games industry. Details on this as-yet-non deal were so light on the ground that not a glimpse of sunlight was obscured and the risk of trips and slips were zero. We had to fill in the gaps and try and make the journey ourselves.
What we knew was that Accor would be the majority shareholder of the new entity (we understand two thirds), with founder & CEO of Ennismore Sharan Pasricha holding a substantial minority position (of, we suspect, one third).
At its inception, the combined entity will comprise 12 brands with 73 hotels in operation with a committed pipeline of more than 110 hotels and another c. 70 hotels under active discussion, and over 150 destination restaurant and bars. Pasricha will share the CEO-ing with Gaurav Bhushan, CEO of the Accor Lifestyle division. Oh and it’ll be based in London, which is a shot in the arm for Brexit Britain.
In order to form this joint venture, Accor intended to buy out its partners in SBE, Mama Shelter and 25h. The planned combination also envisaged the formation of a new company which will hold all the leased assets under the combined entity’s brands.
It was not a lot to work with and, bearing in mind that nature abhors a vacuum, it was then that a good 48 hours of speculation headed this hack’s way via WhatsApp, Zoom, LinkedIn, Teams and Actual Telephone. And all of it most welcome, because who doesn’t want to have a good old speculate about the sector they love?
And the key questions were: Why? Why now? Why announce now? And then ‘why?’ again. On the face of it, this twinkle-in-the-eye of a deal was about lifestyle. Sébastien Bazin, chairman & CEO of Accor, said the partnership would “take our lifestyle ambition to a new and exciting level”. OK, but, compared to IHG or Hilton, it’s not as though Accor doesn’t already tick the lifestyle box.
It was all a bit Choose Your Own Ending. Why was Accor deviating from its path of just taking chunks of brands? Was it creating a unit it could sell? Could it really be autonomous? Was it planning to turn all the segments into autonomous units? Who wanted to be CEO of economy?
It was the Why now? Which turned the process closer towards Hunger Games. Who needed the announcement to come out? Given the response of Accor’s share price, falling 2%, it wasn’t Accor. So why Ennismore? Pasricha was already CEO, was he only in it for Accor’s global reach? Does Accor have its eye on Gleneagles or the Hoxton assets, all of which are held outside the Ennismore currently in talks? And where does Gleneagles fit, not being lifestyle, but nonetheless being a brand named as part of the potential new entity?
After all, when there is a merger, aren’t we all taught to look for which party is being feasted on? And where there are assets and a need for cash, won’t there be someone looking for, at the very least, first dibs? Let us not forget the AccorInvest refinancing in all this.
The possibilities were limitless and we look forward to some relief should this deal be agreed. But despite the missing links, it did at least indicate that the sector is on the move. Let the games begin.