'So many positives': Bob East says shareholders back Mantra-Accor deal
Mantra Group boss Bob East says “shareholders are very positive” about the $1.3 billion merger of the Australian hotel operator with French giant Accor, a deal which will reshape Australia’s hotel landscape.
Speaking to The Australian Financial Review after Mantra Group entered into a binding agreement to sell all its shares to Accor at $3.96, Mr East said his discussions with shareholders indicated they were in favour of the deal which will require their support to proceed.
“The responses I have received have been very positive. Many of them have been with us a long time and hold the company in high regard,” he said.
Should the deal be successfully concluded early next year it will mark the pinnacle of Mr East’s decade-long stint at Mantra Group, leading the company from the wreck of the 2008 collapse of property Group MFS to become the nation’s second-biggest hotel and resort operator and a $1.1 billion listed entity.
A combined Accor and Mantra business in Australia will create a hotel giant with more than 300 hotels and more than 50,000 rooms – nearly five times the size of the next biggest operator, Choice Hotels – giving it about a 15 per cent market share.
“It’s still got a long way to play out, but it’s going to have clear benefits for our customers and for our staff,” Mr East said. “There are so many positives.”
Mantra has retained Highbury Partnership as financial adviser and Baker McKenzie and Hogan Lovells as legal advisers.
A vote on the proposed merger, via a scheme of arrangement, is expected to be held in March next year and will require the support of 75 per cent of voting shareholders and a majority of shareholders to participate.
Major shareholders in Mantra include BT (8.7 per cent), AustralianSuper (6.1 per cent) and Norway’s Central Bank (more than 4 per cent), part of a diverse register whose ownership profile could change significantly in the coming weeks.
About 20 per cent of Mantra shares have traded since the start of the week. Shares closed on Thursday unchanged at $3.88.
Before any vote though, the deal will need to be approved by the Federal Court and pass scrutiny by the Foreign Investment Review Board and gain Australian Competition and Consumer Commission approval.
“The ACCC is expecting a detailed submission from the parties shortly. If a public review is required, the matter will be placed on our mergers public register and we will consult with industry participants,” said an ACCC spokesman.
A spokesman for Treasury said it could not comment on specific FIRB cases.
Veteran AccorHotels Asia Pacific boss Michael Issenberg described the potential deal with Mantra Group as the “perfect complement” to its existing operations in Australia.
Mr Issenberg, the architect of Accor establishing its leading position in Australia over the past 27 years, said there was no better time to expand the Accor network given the rising number of visitor arrivals, “largely driven by Asia”.
“Mantra’s brands will perfectly complement the existing AccorHotels portfolio we have in Australia and we are confident that AccorHotels can bring the expertise and experience to successfully manage the Mantra network into the future,” Mr Issenberg said.
Importantly, the deal will give Accor a large exposure to the serviced apartment market via Mantra’s management letting rights business, which comprises two-thirds of its 21,500-room portfolio, and much greater clout in its battle with online booking platform Airbnb.
AccorHotels Pacific boss Simon McGrath said the deal had significant potential for its operations in Australia and New Zealand and for its growth in the region.
“Mantra is a business we have admired for some time and their cultural values very much align with ours. They have achieved excellent market standing and quality operations in areas that are very complementary to our business,” Mr McGrath said.
Mantra operates 127 properties over 20,000 rooms in Australia, New Zealand, Indonesia and Hawaii across three main brands Peppers, Mantra and Breakfree. Accor is the country’s biggest hotel operator with around 210 properties and 30,000 rooms. It recently opened the new five-star Sofitel Hotel in Darling Harbour owned by investor Jerry Schwartz.
