France's AccorHotels is reportedly set to take a 50-percent position in Sam Nazarian's SBE Entertainment Group, which also owns the Morgans Hotel Group. The move is part of a cascade of deals AccorHotels and its maverick CEO Sébastien Bazin have made in the preceding months and years that have included its 2016 acquisition of Fairmont Raffles Hotels International, a deal that gave AccorHotels heightened exposure in North America. The investment in SBE furthers this.
AccorHotels' investment in SBE is valued at $319 million, broken down as $125 million to acquire the common stock held by Ron Burkle’s Yucaipa Cos. and real-estate investment firm Cain International, and an additional $194 million to acquire preferred equity owned by the two firms.
The deal marks Cain International's exit from SBE and likely the same for Yucaipa. Cain took its position in SBE around the time SBE completed its acquisition of Morgans in December 2016.
The transaction, which law firm Proskauer advised AccorHotels on, is subject to regulatory approvals and should be completed by July 31, 2018. Sam Nazarian will continue to own the remaining 50 percent of SBE and remain CEO.
Along with owning Morgans and its lifestyle brands that include Mondrian and Delano, other SBE hotel brands include SLS and Redbury. It, too, has tentacles into the nightlife and food-and-beverage space with brands such as Hyde and Katsuya. The breadth of SBE's product is part of what attracted AccorHotels and Bazin, who called the company "one of the most innovative groups in the luxury lifestyle space worldwide."
"It marks a new step in expanding AccorHotels' footprint in this fast-growing segment in key U.S. cities such as Miami, Los Angeles or Las Vegas, and in other international destinations," Bazin continued. "The new luxury"is all about exclusive experiences and incredible lifestyle concepts and SBE brands have the perfect know-how that will complete perfectly the AccorHotels portfolio."
SBE said the deal will allow it to expand into new markets outside of the U.S., including what it called "priority growth markets" in the Middle East and Latin America. Its pipeline already includes projects in cities such as Atlanta, Chicago, Washington D.C., Dubai, Rio de Janeiro, Mexico City, Cancun, Tokyo and Los Cabos.
The link up between the two companies would allow SBE to tap into AccorHotels' some 145 million loyalty members, along with its owners and developers.
Nazarian described the partnership with AccorHotels as "a new milestone in SBE's history."
"This long-term investment by AccorHotels provides SBE, its customers and hotel owners with greater depth and breadth around the world and supports our collective ambition to be the best lifestyle hospitality company in the market," Nazarian said. "Building on our acquisition of Morgans Hotel Group in 2016, this investment will further accelerate our growth both domestically in the United States and in new markets internationally, particularly in Europe."
In a press release, Nazarian called Bazin "my dear friend" and applauded AccorHotels for its innovative and pioneering culture.
Nazarian believes the two companies complement each other. "Moving forward, SBE and AccorHotels together are committed to bringing our unique lifestyle experiential offering to more destinations and serving our discerning guests with unforgettable memories," Nazarian said.
The partnership could help to accelerate AccorHotels' growth in the U.S., in gateway markets, including Los Angeles, Miami, Las Vegas and New York. The bulk of AccorHotels' rooms are in Asia and Europe, with less than 5 percent in North America.
Investment by AccorHotels in other companies is becoming routine, increasingly so since it sold a portfolio of assets estimated at around $5.3 billion in February. "The deconsolidation of AccorInvest will provide AccorHotels with substantial leeway to enhance our dynamic growth and innovation strategy," Bazin said at the time of the deal.
(Hotel Management spoke to Bazin about his company's acquisitive nature during the 2018 International Hotel Investment Forum in Berlin.)
Recent acquisitions by AccorHotels include Mövenpick Hotels & Resorts for an estimated $582 million, Chile's Atton Hoteles and a 50-percent stake in South Africa-based Mantis Group.
While some of AccorHotels' deals are in the traditional hotel space, others have been tangential, such as its April acquisition of Glasgow-based ResDiary, a restaurant reservation and table management platform. The company also includes home-sharing platform Onefinestay.
Bazin has been adamant that these types of deals will continue as he molds the company into a travel company with multiple verticals. There are also recent reports that Accor is pressing forward with plans to buy a stake in airline Air France-KLM, but is searching for partners to make a deal happen.