How Accor Thwarted the Advances of Its Largest Single Shareholder

Chinese firms have developed quite a taste for hospitality companies in recent years with high-profile investments in the likes of Hilton Worldwide, Carlson Hotels, and NH Hotel Group.

Last year AccorHotels also came under the spotlight when the biggest single shareholder, Jin Jiang, attempted to increase its stake in the Paris-headquartered group.

The move to up its shareholding to 29 percent ultimately failed and recent changes in the law by the Chinese government make the prospect of more bids look less likely.

At a recent meal with journalists AccorHotels’ chairman and chief executive Sebastien Bazin revealed some of what went on behind the scenes – and why former French President Nicolas Sarkozy, a recent board recruit, might have helped had he been around at the time.

Bazin said that Jin Jiang “tried fiercely” to build its stake to 29 percent. That level of ownership would have given it much greater control but being a Chinese company with limited European experience Jin Jiang wanted the board’s blessing.

To get it, Bazin said, Jin Jiang would have needed to pay a “control premium.”

For whatever reason, this scenario didn’t materilze and Jin Jiang now holds only 12.56 percent of the company, according to latest disclosures, down from 15.03 percent at the end of June 2016.

“Had Sarkozy been on the board a year ago. I guarantee you that I would have been able to meet with the Prime Minister in China in Beijing and I would have got the answer from the government of Beijing on what they would have allowed Jin Jiang to do or not to do,” Bazin said.

He also said that Jin Jiang’s interest only came after AccorHotels had bought a 10 percent stake in rival Huazhu Hotels Group (also known as China Lodging Group) in December 2014.

China’s Capital crackdown

Jin Jiang’s failure to increase its ownership of AccorHotels now looks costly given the changes that have gone on in China since. At the end of last year Beijing moved to tighten controls over the outflow of money from the country.

This followed a period of intense overseas spending, from the likes of Anbang Insurance Group, Fosun, HNA Group and Jin Jiang with plenty of this taking place in the travel and leisure space.

Splashing the cash in Europe and North America now looks like it will be harder to do.

“Jin Jiang today has their hands tied. Because if they want to do something with Accor they need to ask and seek permission from Beijing and likely Beijing will not authorize,” Bazin said.

Getting the money together might not be such a problem if it is already overseas. In an interview recently with Reuters Qian Jiannong, the president of Fosun’s tourism division, said that deals can still be done.

“If it’s an overseas target, we will definitely use our offshore platform to acquire it. We have units incorporated abroad and at home,” he said.

And as if to prove this, HNA last week bought an 82.5 percent stake in Frankfurt Hahn airport.

The Rezidor Takeover

One hospitality company that is still — at least for the time being — being pursued by Chinese money is Rezidor Hotels Group.

As part of its takeover of Carlson Hotels, HNA got its hands on 51.3 percent of Rezidor. This meant that it was required to make a mandatory takeover bid. It did so in December,  offering $321 million for the 48.7 percent of the company that it does not own.

However, Rezidor’s board has not given its blessing to the bid, pointing out that HNA has not fleshed out its strategy for the business.

Because it owns more than half of Rezidor already, HNA has board representation but these members were not part of the deliberations over a full takeover.

Andre Juillard, head of Travel & Leisure at Kepler Cheuvreux, believes that it unlikely that HNA will increase its offer anytime soon. Partially due to the fact that it doesn’t have to and also because of the changes in China mentioned above.

“For me the story is relatively simple and it is based on the fact that they (HNA) have control of the group because they have 51.3 percent of the shares and they don’t care for the moment having this group listed even if it represents an additional cost for them,” he said.

For the time being, there appears no prospect of HNA integrating its hospitality businesses even though this might make sense.

“The logic would be to integrate everything, the logic would be to see HNA bidding on NH, on Rezidor and integrating all these companies because that would allow them to release their money. But in the meantime I don’t think that they want to pay any premium, I don’t think they are in a hurry for that,” he said.

Interestingly, Bazin said that Accor had looked at buying Rezidor but that it did not end up bidding for the company, citing concerns over the nature of the leases. If and when Rezidor sorts this out, which it is the process of doing, it might be a more attractive takeover target for someone.