AccorHotels has set a bid for Australia's Mantra Group at $920 million in an aim to capitalize on skyrocketing tourism across the country.
The Paris-based company has offered A$3.96 per share at a 23 percent premium of Mantra's closing price on Friday, Oct. 6, 2017. Meanwhile, the total offer is at A$4.02 per share if a six-cent final dividend paid in 2017 is included. “They haven’t lowballed it, that’s for sure,” Anthony Porto, portfolio manager at Martin Currie Australia, which owns a stake in Mantra, told Reuters.
While a deal would be marked Australia's second largest in the hotel industry, the country's industry is very fragmented and Mantra's shares increased 17 percent on Monday, Oct. 9. Investors expect Accor's deal could gain regulatory clearance. According to Mantra, Accor is allowed to conduct due diligence "to determine if a transaction can be agree and recommended unanimously by the Mantra board."
Australia's hotel groups have been rushing to increase the country's current hotel stock as demand continues to rise. The country's inbound tourists reached a record 7.9 million in last year after increasing by 9 percent. International visitor spending also rose to record levels, achieving $4.6 billion last year. Chinese tourist numbers, who tend to stay longer and spend more, grew by 10 percent as European and U.S. visitor numbers also saw increases.
Porto explained that Accor and Mantra could potentially secure major savings from the merger as the companies combine their back office and booking systems. Accor would also benefit from absorbing its biggest rival in the country and utilizing its strengthened presence to face new competitors, like Airbnb. IBISWorld data has shown that Accor and Mantra would make up approximately 11 percent of Australia's hotel market. Together they would own 300 hotels and about 50,000 guestrooms following the deal.
Michael McCarthy, chief market strategist at CMC Markets, noted that the Australian Competition and Consumer Commission's approval of the deal rests on how the ACCC views the industry's setup. “It’s a difficult one to make a call on because the ACCC could take a narrow or broad definition to competition, for example, is Airbnb included in the competitive landscape?” McCarthy told Reuters.