Marriott agrees to buy African hotels business

http://www.ft.com/intl/cms/s/0/5e973f1e-4875-11e3-8237-00144feabdc0.html

High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft.com to buy additional rights. http://www.ft.com/cms/s/0/5e973f1e-4875-11e3-8237-00144feabdc0.html#ixzz2k8mVmNnf

Marriott International has agreed to buy the brands and management business of Africa’s largest hotels group, in a move that will nearly double the US hotel chain’s rooms in the continent.

The deal involves 116 hotels that South Africa’s Protea Hospitality Group operates or franchises in South Africa and six other sub-Saharan African countries, Marriott said.

The two groups have signed a non-binding letter of intent to negotiate exclusively with each other. The expected value of the transaction was not revealed.

Marriott’s move to increase its presence in Africa reflects burgeoning investor interest. The continent is home to some of the world’s fastest-growing economies. However, it remains under-developed and some African cities struggle to provide enough quality accommodation for the increasing numbers of visiting business people and tourists. This has led to new hotels springing up in capital cities.

The deal would accelerate its expansion plans in the “dynamic and growing African hotel market”, Marriott said, and give it more than 23,000 rooms in Africa.
“The development cycle for opening new hotels in Africa is typically long, due to the challenges posed by emerging infrastructure, so joining forces with Protea Hotels and their highly respected management team is the strongest way to jump-start Marriott’s footprint in Africa,” said Alex Kyriakidis, president of Marriott International for the Middle East and Africa.
South Africa has by far the continent’s most developed corporate sector, and multinationals have been piggybacking off companies there to gain exposure to and networks in the wider continent.

In 2011, Walmart agreed to pay $2.4bn for a 51 per cent stake in Massmart, a South African retailer with a presence across the continent, while the Industrial and Commercial Bank of China (ICBC) holds a 20 per cent stake in Johannesburg-based Standard Group, Africa’s largest bank by assets.

The majority of Protea’s hotels are three- and four-star operations in South Africa, but its network reaches across southern, eastern and western Africa as it manages hotels from Zambia to Uganda and Nigeria, the continent’s most populous nation and its top oil producer.
Protea said it would create a property company to retain ownership of the hotels it currently owns and retain a minority stake in other Protea-managed hotels.