AccorHotels strikes again taking Sbe stake

AccorHotels acquisition spree continued on Friday with news that it has signed a letter of intent to acquire a 50% stake in Sbe Entertainment Group, expanding its reach into the lifestyle segment and further growing its limited portfolio in North America by adding gateways like New York, Los Angeles, Las Vegas and Miami.

AccorHotels will acquire the 50% of sbe's common equity held by Ron Burkle’s Yucaipa Cos. and the real estate investment firm Cain International for US$125 million. Sbe Founder Sam Nazarian will continue to own the remaining 50%. In addition, AccorHotels will invest US$194 million in a new preferred debt instrument that will be used to redeem all existing preferred units, also held in part by Cain International.

AccorHotels’ total investment in sbe will be US$319 million and somewhat diverts from its stated strategy to move further toward an asset light model. It reportedly will use cash from its recent spin off and sale of real estate assets to buy this stake in Sbe. The transaction should be completed by July 31, 2018.

“The drumbeat of consolidation continues,” David Loeb, managing director of Dirigo Consulting, near Santa Fe, New Mexico, told HOTELS on Friday. “The deal makes sense for Sbe to join a brand distribution platform; it’s great for Accor to get these hotels and the growth engine that comes with that. Management and brand businesses are seeing consolidation, which I expect will continue.”

By the end of 2018 Sbe, which acquired Morgans Hotel Group for US$82 million in 2016, will operate 25 hotels with 7,498 keys primarily in North America. It will continue to be led by its Founder and CEO Sam Nazarian and retain its global headquarters in New York. Its portfolio includes hospitality and residential brands such as SLS, Delano, Mondrian, Hyde, The Originals (Sanderson, St. Martin Lane, Hudson, 10 Karakoy, Shore Club) and the Redbury Hotels.

Sbe currently has a further 20 hotels and residences around the world in its pipeline, as well as 59 standalone restaurants and nightlife venues. Upcoming opening includes Delano Rio de Janeiro, Delano Dubai at the Palm and Hyde Midtown in Miami. In addition, Sbe has sold 1,500 branded residential units valued at US$2 billion with over 2,500 units valued at US$2.5 billion in its pipeline.

Nazarian said in a statement that this move will further accelerate Sbe’s growth both in the United States and in new markets internationally, particularly in Europe.

With its global hotel development platform and presence in 100 countries, AccorHotels will play a key role in developing sbe’s luxury lifestyle hotel, restaurant and entertainment brands globally.

“It will be interesting to see how owners will react and what their perspective is on future transactions with Sbe,” Loeb added. “Some owners are old Sbe and some are old Morgans owners. I don’t think have the contractual rights to block it or get out of their management contracts. It will be hotel by hotel. But it will be interesting to watch.”

Sbe hotels will also be distributed on the AccorHotels distribution platform, be featured on Accorhotels.com and will be part of the AccorHotels loyalty program.