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[SYDNEY] Australian No 2 hotel company Mantra Group Ltd agreed on Thursday to a A$1.18 billion (S$1.25 billion) buyout from larger Accor SA, a deal which would join the country's top two hotel groups at a time when tourism is rising sharply.
The deal would give the combined group about 50,000 rooms or about 11 per cent of Australia's hotel market, according to IBISWorld statistics. It comes as Australia's hoteliers rush to build more rooms to meet growing demand.
France-listed Accor is offering A$3.96 per share, a 23 per cent premium to Mantra's last trade before the bid was announced on Monday. The offer price is more than double Mantra's A$1.80 issue price when it listed in 2014.
Shares in Sydney-listed Mantra edged up 0.1 per cent by midsession to A$3.88, indicating investors support the deal but are leaving open the possibility it may meet regulatory hurdles.
"It's within the bounds of fairness, given what the shares have done recently," said Noel Webster, a portfolio manager at BT Investment Management, Mantra's largest shareholder.
"Our first reaction would be not to block it." The merger needed clearance from the Foreign Investment Review Board and antitrust regulator the Australian Competition and Consumer Commission (ACCC), Mantra said.
The ACCC expected the No 1 and No 2 hoteliers to file a "detailed submission" about the deal shortly, a spokesman said.
The regulator previously said it would review any deal to decide whether to open a formal investigation.
The deal would be the second-biggest in Australia's hotel sector, and the largest buyout of an Australian entity by French interests, according to Thomson Reuters data.
The number of visitors to Australia surged 9 per cent in the past financial year to hit a record 7.9 million while spending by international visitors climbed to S$40.6 billion - also a record.
Mantra Chairman Peter Bush said in a statement the company's board was recommending the deal to shareholders, having concluded that the "sale of the company at a significant premium to market is an attractive outcome".
Accor Chairman and Chief Executive Officer Sebastien Bazin said the takeover would "underpin our long-term growth in the Asia-Pacific region".
If approved, the merger could put pressure on Australia's third-largest hotel company, Marriott International.
Marriott Australia and New Zealand Vice President Sean Hunt declined to comment.