Paris-based hotel company Accor and London-based hospitality firm Ennismore are entering into exclusive negotiations to form what they are claiming will be the world’s leading lifestyle operator in the hospitality sector. Through this all-share merger, a new autonomous asset-light entity will combine the Hoxton, Gleneagles, Delano, SLS, Mondrian, SO/, Hyde, Mama Shelter, 25h, 21c Museum Hotels, Tribe, Jo&Joe and Working From_ brands.
The new entity will be headquartered in London and will take the name Ennismore.
Sharan Pasricha, founder and CEO of Ennismore, and Gaurav Bhushan, CEO of the Accor Lifestyle division, will become co-CEOs of the combined entity, alongside an international management team coming from the various brands and industries. Accor will be the majority shareholder of the new entity, with Pasricha holding a substantial minority position.
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 approximately another 70 hotels under active discussion, and more than 150 destination restaurant and bars. Based on the current network and pipeline, Accor expects the lifestyle platform to achieve earnings before interest, taxes, depreciation and amortization of more than €100 million by midterm, with the project resulting in significant cost synergies of approximately €15 million per year.
“Lifestyle, entertainment, places with a soul have been at the heart of our development and growth strategy over the last years,” said Sébastien Bazin, chairman and CEO of Accor. “Partnering with Ennismore’s founder Sharan and his great teams will take our lifestyle ambition to a new and exciting level. With this combination, we are leading the hospitality industry by creating the largest and fastest growing ecosystem of world-class brands. Lifestyle is a sector fueled by passionate and daring entrepreneurs, constantly pushing the boundaries of a reinvented vision of traveling the world. I am proud Accor has been able to join forces with many of the most creative and talented ones. This new powerful combination is set to become the engine of our exciting future growth.“
“This exciting autonomous entity with Accor—one with culture and brand purpose at its heart—allows us to come together to build on our combined portfolio of unique lifestyle brands, accelerate our growth and explore new markets,” said Pasricha. “I look forward to working with Gaurav and Sébastien on this exciting next chapter.”
“Joining forces with Sharan and Ennismore’s talented teams will be a major step in Accor’s development strategy,” said Bhushan. “With this combination, we are putting together an unrivaled portfolio of unique brands that appeals to owners, partners and guests, supported by the greatest set of talents in the industry, state of the art distribution and tools and a common ambition to continue to grow and innovate. I very much look forward to our journey together.
In order to form this joint venture, Accor intends to buy out its partners in SBE, Mama Shelter and 25h. Accor will take full ownership of SBE’s asset-light hotel business, comprising the Delano, Mondrian, SLS and Hyde hotel brands. SBE currently operates 22 hotels with more than 40 properties in the pipeline, which has more than doubled since Accor’s initial investment in SBE in 2018, with key upcoming openings such as Mondrian London and SLS Dubai in 2021. SBE will retain the Hudson and Delano brand names, and SBE founder Sam Nazarian will gain full ownership of SBE’s Disruptive Restaurant Group Platform and its 15 owned restaurant and nightlife venues. SBE was represented by law firm Pryor Cashman, who also advised on the sale of SBE Entertainment Group’s first 50 percent interest to Accor in 2018.
Eldridge, a holding company with a network of businesses across finance, technology, real estate and entertainment, is acquiring SBE’s two remaining assets: the Hudson Hotel in New York City and the Delano in Miami. Cain International, Eldridge’s real estate investment firm, has been appointed to lead a strategic repositioning of both assets. “Long term, we are confident well-positioned assets in gateway cities, such as the Hudson and the Delano, will be resilient in a post-COVID landscape,” said Jonathan Goldstein, CEO of Cain International. “There is no denying that it has been a difficult time for the hospitality sector, but we remain firmly planted in our belief that assets with the right fundamentals partnered with brands committed to innovation are poised to benefit from long-term growth.”
This cash and asset swap transaction entails a $300 million cash investment from Accor almost entirely through the redemption of SBE’s debt.
The New Company
The planned combination also envisages the formation of a new company that will hold all the leased assets under the combined entity’s brands. The deconsolidation of the existing leases is expected to have a €52 million positive effect on Accor’s consolidated net debt in 2020.
Under the leadership of Pasricha and Bhushan, each brand will retain support of its founders, including the Trigano family, founders of Mama Shelter; Christoph Hoffman, founder of 25h; Nazarian; Laura Lee Brown and Steve Wilson for 21C; and Melissa and Mark Peters for Tribe.
The new venture will have an in-house global creative studio to design interiors and brand communication, a digital and technology team and a team of restaurant and bar specialists.
Accor’s lifestyle operations today represent approximately 0.5 percent of Accor’s fees and more than 25 percent of the pipeline fees. Growth will be accelerated, building on the existing footprint in Europe and the U.S., and a rapidly expanding presence in Asia Pacific, the Middle East and South America supported by Accor’s development teams, according to the company.
The closing is expected to occur in early 2021 and is subject to the employee consultation process and customary regulatory authorizations for projects of this type.