When Bloomberg broke the news in August that Accor was looking at an IPO for its lifestyle hotel business Ennismore, it gave the impression that the French hotel company was eyeing the disposal one of its most prized assets.
Not so, according to the company. Accor’s recent Q3 update, shed light on what it plans to do with Ennismore – although, according to some industry analysts, it could be doing even more.
What Accor plans to do with Ennismore
A quick recap – Ennismore was founded by entrepreneur Sharan Pasricha in 2011. A decade later it entered into a JV with Accor whereby the pair would pool lifestyle brands. At the time Accor owned two thirds with Ennismore shareholders owning a third. Since then Accor has sold a 10.8 per cent stake to a consortium of Qatari investors led by Qatar First Bank (QFB) for a total amount of €185 million, valuing the total value in excess of €2 billion.
Now on its latest earnings call at the end of October, Accor has outlined what it sees as the next steps for Ennismore.
Martine Gerow, group chief financial officer, confirmed that the board had “approved the evaluation of a potential listing of Ennismore”
She added: “Such a listing would enhance liquidity for minority shareholders and provide additional flexibility to support any small growth platform. Now in the event a listing would take place, Accor would remain the controlling shareholder of Ennismore. And at this juncture, there's no certainty that a transaction will be completed and obviously, we will inform the market of future development as appropriate.”
Next steps
Conforming that it will remain the controlling shareholder scotches any suggestion that Ennismore would be divested – it also begs the question, what next?
Asked by one analyst about growth, Gerow said: “We don't intend to go asset heavy in Ennismore, but Ennismore historically has grown through acquisitions, and this is potentially something that could be on that road map going forward. And that's where the flexibility comes in.”
So not only is worth keeping an eye on a future IPO but also additional acquisitions.
Big identity
As usual when the big US hotel groups zig, Accor zags. Whenever the likes of Hilton or Marriott make an acquisition, integration into the central system is full and fast. Accor, meanwhile, has been happy to keep the Ennismore collection at arm’s length – in order to help each of its brands maintain their identity.
“Unlike the ‘designed by committee’ lifestyle brands of some peers, Ennismore's brands were largely set up by lifestyle entrepreneurs and have seemingly stayed true to their origins even if now part of a bigger organisation. Kimpton (IHG), Graduate (Hilton) and possibly Edition (Marriott) can boast a similar heritage, but Ennismore has more than a dozen of these brands,” said Sabrina Blanc, sell side analyst at Bernstein in a research note.
Accor’s indication that it wants to keep a controlling stake even if it goes ahead with an IPO, implies that it sees value in keeping hold of Ennismore
Blanc added: "[There] are demand risks around doing an IPO of a minority stake in a French business, and it would feel like a short-termist move. Accor could instead focus on benefiting itself from Ennismore’s growth and fully integrating the boutique brand into the group, but that goes against the firm commitment to return cash to shareholders, including in the event of disposing of its 30 per cent stake in Essendi.”