Accor to return €1 billion to shareholders

The Pullman Paris Tour Eiffel is part of the Accor portfolio. Photo credit: Accor

Accor plans to return €1 billion to shareholders as it completed its move to an asset-light structure with the disposal of Orbis and the sale and management back of the Mövenpick leases.

The company said it would now move to organic growth with “a targeted acquisition strategy.”

In a call to investors, the group described a “two-pronged approach to redeploy capital” by increasing shareholder returns and continuing with hotel acquisitions of small and midsize asset-light groups, “consolidating leadership in key markets, getting access to leadership in high-growth markets” and “gaining speed on niche segments such as lifestyle.”

Accor Chairman/CEO Sébastien Bazin said, “Accor has now become a fully asset-light group. By combining a two-year €1 billion shareholder return program with the pursuit of a targeted acquisition strategy, the group demonstrates the strength of its new model and its ability to rigorously execute its strategic roadmap.

“We are now focused on the organic growth of our portfolio, the strengthening of our leadership in our key markets, the attractiveness of our brands for our customers and our owners and an unwavering commitment to promoting our values and a distinctive vision of hospitality,” he said.

The company has restructured Mövenpick hotels’ lease portfolio through a sale-and-management -back agreement with HR Group, a German private fund, with the hotels to be managed by Accor under a 20-year agreement. This will result in a €429 million reduction of Accor’s consolidated debt, predominantly related to IFRS 16 lease liabilities.

It also has agreed to sell its 85.8 percent stake in Orbis to AccorInvest for €1.06 billion. 

The deals added to a busy quarter for the group, which sold a 5 percent stake in Huazhu for $451 million and a 5 percebt stake in AccorInvest for €204 million.

The group has come under increasing pressure in recent months, with reports of shareholders disgruntled at the company’s share price and an increased interest from activist funds. The group’s share price closed at €41.63 ahead of the announcement on December 16, giving it a market capitalization of €11.34 billion, up from its year low of €32.39 but down from its five-year high of €50.63.

In November, Accor investor CIAM said that Accor was undervalued by public markets and a good potential target for a private-equity buyer. Catherine Berjal, CEO of CIAM, said that a buyer could dispose of Accor’s non-core financial assets and return up to 35 percent of its market capitalization in cash, with additional options including selling its luxury brands.

Last week saw the company’s board reaffirm its faith in Bazin, unanimously recommending that he should remain as chairman and CEO for a three-year term taking his tenure to 2023. The board said the proposal conveyed “the renewed confidence the board has in its leader and the choice to pursue the implementation of the strategic roadmap. The board emphasized the extent of the transformation achieved and its will to maintain Accor in a sustainable growth and value creation model for its shareholders over the coming years.”

Next year will see Accor relaunch its loyalty program, All—Accor Live Limitless—after revealing its strategy for the product at its full-year 2018 results. Accor is to invest €225 million over two years on loyalty, partnerships and brand marketing, with the program expected to break even in 2021, then generate an incremental €60 million in 2022 and €75 million per year from then on, after an impact of around €55 million this year and €45 million in 2020.

The group forecast a 10 percentage point increase in contribution to turnover from the loyalty program increase, €100 million in partnership revenue (from €6 million) and three point RevPAR increase.