Rival turns Orbis investor
The largest hotel chain in the country eliminated its main competitor and gained a strategic investor in one fell swoop last Wednesday when a consortium led by French hotel group Accor purchased a 35.37% stake in Orbis for zl. 578.6 million ($134.6 million).
The deal removed the Polish operator's only major contender for weary business travelers and foreign tourists in the country's three-star hotel segment, industry analysts said last week. Accor already operates five existing three-star hotels in Poland, and has 10 more buildings under construction.
"It's very good that this privatization is completed because Orbis has lost its (competitor) by acquiring Accor as a strategic investor," said Anna Hess, a leisure industry analyst at CDM Pekao Securities. "With the partnership they will integrate, not compete."
Accor and its two consortium partners, American investment fund FIC Globe and Polish real estate development company Globe Trade Centre (GTC), paid zl. 35.5 per Orbis share, 11% more than Wednesday's closing price of zl. 32 per share. Analysts, however, said the zl. 35.5 per share was below the company's market value, which they estimated to be zl. 40 per share or more.
Accor now owns 20% of Orbis, while FIC holds 10.37% and GTC has 5%. The state treasury owns a 6% stake with the rest of the shares remaining in the hands of individual investors.
Under the terms of the deal, Accor cannot sell its shares for the next three years. The French company also had to agree not to lay off any of Orbis' 8,500 employees until 2003, and to "refrain from developing competing hotels outside the Orbis umbrella" by combining its existing and future hotels with the Orbis chain.
Although Orbis began renovating some of its hotels two years ago, Accor will continue the refurbishment program and modify it to meet the French operator's hotel standards, analysts said. The Orbis hotels will be remodeled and operated under the brand names Sofitel, Novotel, Mercure, Ibis and Etap, according to an Accor press release. The French company did not describe the renovations that would take place or how much it would spend on the project.
Orbis intended to spend $225 million on upgrades between 1998 and 2002, said Grzegorz Latala, director of research at Raiffeisen Capital & Investment Polska. Accor will have to spend 30-50% more than that to raise Orbis' hotel standards to those of the French company, he said.
Orbis hotels in major cities, especially in Warsaw and Krakow, can expect to receive total renovations, while establishments in smaller cities will receive basic room refurbishments, Hess said.
"Before it was just changing the windows, nothing more," she said.
The Treasury Ministry, which is responsible for conducting the privatizations of state companies, did not name any other possible contenders for the stake. Analysts said the consortium was the only bidder.
"Because of the huge investment outlays needed to bring Orbis up to the standards of Western hotel chains, we didn't see any offer from other (operators)," Latala said.
Orbis has more than 10,600 rooms in 56 hotels in 27 Polish cities, giving the company a 40% market share. Most of Orbis' hotels are in the three-star range. Orbis also has car rental, travel agency and casino subsidiaries. Accor has 370,000 rooms in 3,400 hotels in 90 countries along with travel agencies, restaurants and casinos.
The privatization of Orbis began in 1997 when its shares were floated on the Warsaw Stock Exchange. In 1999, the government sold 15% of its stake in the hotel chain to Deutsche Bank, which resold its shares to British and American financial investors.
