AccorHotels to Buy $319M Stake in sbe

By Barbra Murray

sbe Corporate Office, Los Angeles

A new partnership is in the works for AccorHotels and sbe Entertainment Group, as the two companies ink a letter of intent and enter into exclusive negotiations for the French travel and lifestyle group to acquire a 50 percent interest in Los Angeles-based luxury hospitality company sbe. AccorHotels’ investment will total $319 million.

“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,” Sam Nazarian, founder & CEO of sbe Entertainment Group, said in a prepared statement. 

Skybar at Mondrian Los Angeles

As terms stand, AccorHotels would shell out $125 million on the purchase of 50 percent of sbe’s common equity, partially held by Cain International, effectively becoming partners with Nazarian, who will maintain his 50 percent ownership in the company. The remainder of the transaction calls for AccorHotels to invest $194 million in a new preferred debt instrument to be utilized to redeem existing preferred units, which are also held in part by Cain.

The strategic partnership with AccorHotels will provide sbe with the platform to expand both in the U.S. and abroad, where the company will focus its attention on Europe. The deal comes two years after sbe, joined by partners Yucaipa Cos. and Cain Hoy Enterprise, doubled its hotel collection with the $805 million acquisition of Morgans Hotel Group. Currently, sbe’s portfolio includes such prominent hotels as Mondrian Los Angeles, Delano South Beach in Miami and Mondrian Park Avenue in Manhattan. By year’s end, sbe’s portfolio of operated properties will encompass 25 hotels totaling 7,498 keys, predominantly in North America. There are an additional 20 hotels and residences in the company’s pipeline, along with 59 standalone restaurants and nightlife venues.

Mondrian Park Avenue, New York

Sébastien Bazin, chairman & CEO, AccorHotels, said in prepared remarks, “’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.”

AccorHotels’ acquisition of a stake in sbe is on schedule to close by July 31, 2018, pending the requisite regulatory approvals. Following completion of the transaction, sbe will remain an independent luxury lifestyle operator headed by Nazarian.

Fewer players on the field

Consolidation in the hotel industry continues; it’s a sign of the times. “Players like Airbnb have challenged incumbents’ positions, providing a differentiated offering and pressuring pricing strategies. Due to competitive pressures, players have looked toward M&A to boost revenues and protect margins.,” according to a March 2018 report by audit and advisory services firm KPMG. “Major deals, such as Marriott’s acquisition of Starwood Hotels and Jin Jiang International’s acquisition of Louvre Hotels are forcing the leisure industry to build scale in a bid to protect market share.”

AccorHotels is among the players keeping the consolidation trend alive. In April of this year, the company announced it had entered into an agreement to acquire Switzerland’s Mövenpick Hotels & Resorts, which boasts a portfolio of 84 hotels spanning 27 countries, in a $560 million deal. And more recently, AccorHotels and Chilean group Algeciras signed an agreement to acquire the property company owning Atton Hoteles’ 11 assets in Chile, Peru, Colombia and Florida, in a joint venture giving AccorHotels a 20 percent ownership interest.

Image courtesy of sbe Entertainment Group