Johannesburg - Marriott International, a leading US hospitality group, had signed agreements to acquire three brands and the management company from Protea Hospitality Holdings, the largest hotel group in Africa, for R2.02 billion, the parties said yesterday.
On conclusion of the transaction, Marriott is expected to double its rooms in the Middle East and Africa to more than 23 000, making it the largest hotel company in the region.
The deal is expected to be positive for South Africa and is an indication of investor interest despite overall poorer international sentiment over labour and service delivery unrest.
Analysts have welcomed the investment.
Mike Schussler, an economist at economists.co.za, said although it was positive the deal was too small to make a significant improvement in the falling rand and could only contribute a few positive cents. “It is probably the biggest foreign direct investment since Walmart’s [acquisition of] Massmart, but we’ve got a situation where a lot of people are not positive about the rand. Our exports are not doing enough.”
The purchase price is about 10 times Protea’s anticipated pro forma 2014 calendar year earnings before interest, taxes, depreciation and amortisation, excluding transaction costs. The structure of the payment plan and the source of the financing is not yet clear. Marriott representatives in the US were not available for comment.
De Wet Schutte, an analyst with Avior Research, said: “We now have a big player in South Africa that has access to an international database. That’s the overriding factor.”
The transaction presents stiff competition for local rivals Tsogo Sun and City Lodge, which also compete in the three- to four-star hospitality tier.
Protea, established in 1984, owns 116 hotels with 10 148 rooms in seven African countries under the Protea Hotels and Protea Hotel Fire & Ice lifestyle brand, which caters for mid-market customers. Other brands include African Pride Hotels and Country Lodges. It will retain ownership of the hotels it currently owns through a property ownership company. It will enter into long-term management and lease agreements with Marriott for these hotels.
Marriott will manage 45 percent of the rooms, franchise about 39 percent and lease the other 16 percent. The transaction is expected to close on April 1 pending approval from competition authorities and the Reserve Bank.
Marriott owns nearly 3 900 properties in 72 countries. It reported revenues of $12bn (R130bn) in the 2012 financial year.
Nikki Forster, PwC’s leader for hospitality and gaming, said: “Hopefully, Marriott’s international stature will attract more foreign travellers to the country.”