Leading worldwide hospitality company,
Marriott International Inc.
), recently entered into a non-binding letter of intent with Cape
Town, South Africa-based Protea Hospitality Holdings to buy two
Protea Hotels brands and the hotel management company that looks
after these brands. The acquisition will strengthen the company's
presence in the African market.
Marriott intends to enter into a definitive acquisition
agreement with Protea Hospitality by the end of 2013, and expects
to complete the transaction by first-quarter 2014. However, the
financial terms and conditions of the deal have not been
disclosed. The company believes that this transaction will not to
be accretive to its financial results in 2014.
Protea Hotels is one of most renowned hotel chains in Africa,
focusing on hotel management, leasing and franchising. It
operates through two brands - Protea Hotel Fire & Ice! and
African Pride Hotels collection. Debuted in 1984, Protea Hotels
now boasts as many as 116 properties with 10,184 guest rooms
across South Africa and six countries in Sub-Saharan Africa
including Malawi, Namibia, Nigeria, Tanzania, Uganda and
This acquisition will help Marriott double its African
portfolio by adding as many as 10,000 rooms thereby bringing the
total to 23,000 rooms.
Post-acquisition, Protea Hospitality will continue to own the
properties while Marriott will manage the assets under long-term
management and lease contracts. Following the acquisition, 46% of
Protea Hotels' total rooms will be managed by Marriott, 40% will
be franchised and the rest will be leased.
The African continent is set to witness a surge in demand
driven by the resurgence of the middle class. These are the sole
reasons behind the company's acquisition plan.
According to the United Nations World Tourism Organization
(UNWTO), the African tourism industry grew at an average rate of
4% during the first half of 2013. Further, Africa's GDP is
expected to witness more than 5% growth over the long term.
We view this big ticket acquisition as strategically positive
for both the parties. While Protea Hospitality will enjoy
Marriott's higher scale, Marriott will emerge as a stronger
contender in the dynamic African market.
Marriott holds a Zacks Rank #2 (Buy). Some other hoteliers
that are currently performing well include
Choice Hotels International Inc.
Starwood Hotels & Resorts Worldwide Inc.
Wyndham Worldwide Corp.
). All these companies carry a Zacks Rank #2.
CHOICE HTL INTL (CHH): Free Stock Analysis
STARWOOD HOTELS (HOT): Free Stock Analysis
MARRIOTT INTL-A (MAR): Free Stock Analysis
WYNDHAM WORLDWD (WYN): Free Stock Analysis
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