Carlyle, Home Inns Drive Hotel Consolidation 酒店业整合加速：如家快捷和凯雷投资的并购

By newsdoug on July 6, 2012

Consolidation is accelerating the budget hotel space with new acquisitions by industry leader Home Inns (Nasdaq: HMIN) and private equity giant Carlyle (Nasdaq: CG), as China’s top operators look for ways to maintain their growth going amid a slowing market. This growing string of smaller deals is building up to the big story that’s likely to come in the next 2 years, when we could see a Chinese player make a global acquisition or one of the big foreign operators buy up a Chinese brand.

First, let’s look at these latest 2 acquisitions, both of which are relatively small, probably valued at $20 million or less. The first will see Home Inns buy the operator of 13 eJia hotels in Anhui province, boosting its number of hotels in the interior province by nearly 30 percent. (company announcement) Home Inns will pay just under $10 million in the deal, and will rebrand all the hotels to the Home Inns name. This latest deal follows several similar acquisitions by Home Inns over the last year, including its purchase of a controlling stake of the Motel 168 chain last year from the private equity arm of Morgan Stanley (NYSE: MS) that valued the company at around $500 million. (previous post)

The Carlyle deal looks similar in scope, with the US private equity company paying an undisclosed price for 49 percent of Mandarin Hotel Holdings, unrelated to the better-known Mandarin Oriental chain (Singapore: MOIL). (English article) Like eJia, Mandarin Hotel Holdings is relatively small, operating 25 hotels under the Crystal Orange and Orange brands.

These deals follow a string of similar small acquisitions, mostly valued at $50 million or less, by Home Inns, as well as its top 2 publicly listed rivals 7 Days (NYSE: SVN) and China Lodging Group (Nasdaq: HTHT), operator of the Hanting brand. (previous post) Jin Jiang (Shanghai: 600754), one of China’s oldest hotel brands, has also made moves that indicate it would like to expand its footprint, as all of the companies look to broaden beyond their core bases of low-end hotels concentrated in major cities like Beijing, Shanghai and Guangzhou.

While all these little deals look interesting, I’m waiting for the big one that could see one of the big 3 New York-listed firms merge with one of its peers, or potentially be purchased by a big global operator like Marriott (NYSE: MAR) or Accor (Paris: AC), operator of the Novatel and Sofitel brands. Perhaps even more intriguing could be a tie up that sees one of the domestic budget operators buy or be acquired by a regional luxury operator like Mandarin Oriental or Shangri-La (HKEx: 69), which would create a truly diversified major Asian hotel operator with lots of room for growth.

Bottom line: Two new hotel acquisitions by Home Inn and Carlyle reflect accelerating consolidation in the sector, with a mega-deal likely in the next 2 years.

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