Accor Eyed Possible Deal With InterContinental, Figaro Says

(Bloomberg) -- French hotel company Accor SA considered a possible merger with U.K. rival InterContinental Hotels Group Plc as the tourism industry grapples with the unprecedented collapse in business from the coronavirus pandemic, Le Figaro reported.

To study a transaction, Accor Chief Executive Officer Sebastien Bazin created a team in June that included Chief Financial Officer Jean-Jacques Morin and bankers from Centerview and Rothschild, the French daily reported, without saying how it obtained the information.

Accor’s board is in favor of the project in principle, but Bazin decided it wasn’t the right moment to move ahead. The company hasn’t contacted InterContinental, Le Figaro said.

Accor doesn’t comment on market rumors, a company spokeswoman said by text message, and an InterContinental spokesman also declined to comment.

A combination would bring together InterContinental’s almost 6,000 hotels, under brands including Holiday Inn and Crowne Plaza, and Accor’s 5,000 properties, which include Raffles, Sofitel and Ibis. It would allow for savings on headquarters expenses, reservation systems and loyalty programs, Le Figaro said.

InterContinental’s shares have fallen 22% this year, giving the company a market value of about 7.4 billion pounds ($9.7 billion). Accor has slumped 44%, for a valuation of 6.1 billion euros ($7.3 billion).

Neither company is in a position to buy the other in an outright takeover, Geoffroy Le Guyader, an arbitrage analyst at Kepler Cheuvreux, said in emailed comments.

Accor shares rose 1.3% to 23.47 euros at 11:17 a.m. in Paris, while InterContinental gained 1.3% to 40.46 pounds.

A deal may have made sense when InterContinental shares bottomed out near 21 pounds this year, but the merits aren’t clear now that the stock has rebounded to 40 pounds, analysts Richard Clarke and Harry Martin of Bernstein wrote in a note.

While a combination would be a good geographic fit and offer cost savings, it would be a complex deal, requiring the companies to define the brand portfolio, combine their loyalty programs and align their relationships with property owners, they wrote. Accor would be better off concentrating on the “near-free growth” that comes from striking deals with hotel owners to rebrand existing properties, the Bernstein analysts said.

“This will not help the investor perception that Accor management will not stick to its organic growth/simplification strategy and will continue to look for big deals,” they wrote.

Companies from the travel and hospitality industries have been hardest hit by the pandemic, with lockdowns and travel restrictions all but wiping out sales for some of them in the most recent quarter. CTS Eventim AG, which organizes concerts and musicals, on Thursday said its revenue fell 97% in the second quarter, a decline topped only by package tour operator TUI AG, where the measure collapsed by almost 99%.

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