Colony, Eurazeo up stake in Europe’s largest hotel owner

Private equity firms Colony Capital and Eurazeo plan to increase their stake in the hotel group Accor, which owns the Pullman and Ibis hotel chains, to 30 percent.

Colony Capital and Eurazeo will increase their stake in Europe’s largest hotel owner, Accor, to 30 percent just as the company plans a massive expansion of its business.

Los Angeles-based Colony said it planned to increase its stake in the hotel group to 20 percent from nine percent, while Paris-based Eurazeo said it would raise its stake to 8.5 percent by May 13, and to 10 percent “in the months to come, by the end of the year the latest.”

Virginie Morgon, a member of Eurazeo's executive committee, said in a conference call today the firm would also be seeking board representation. Eurazeo said plans to increase its stake represented a €1 billion ($1.55 billion) investment, funded with €539 million of equity and €538 million of debt. A spokesman for Colony declined to comment on financial details.

“Colony Capital and Eurazeo's increased stakes demonstrate their confidence in the management team and their strategy, the group's potential for value creation and the strength of its assets,'' the duo said in a joint statement.

Accor plans to expand its hotel platform from almost 500,000 rooms to up to 700,000 by 2010, with 22 percent focused in Asia, 41 percent in Europe and 20 percent in North and Latin America. It currently operates the luxury hotel chain Sofitel, the upscale Novotel and Pullman brands and the economy Ibis hotel group.

In a separate statement, Accor said Colony and Eurazeo had to confirm the company’s growth strategy and guarantee their investment would not lead to a “de facto takeover,” before it would grant board seats.

Morgon said Eurazeo – which first invested in Accor in 2005 – was “totally convinced'' by Accor's strategy, adding: “A lot of things are being done and a lot will be done. We are absolutely sure the market will recognize this.” The investment, she went on, was a “natural trend in view of our historical links with the company.”