InterContinental Hotels Group (IHG) today announces an agreement to acquire a new midscale extended stay brand and an extensive portfolio of new management contracts. The deal will add the midscale extended stay Candlewood Suites brand to IHG’s brand portfolio and increase distribution by 108 hotels and nearly 12,500 rooms in the Americas.
Candlewood Suites is an established brand whose hotels are all purpose-built and are on average less than five years old. The addition of this new brand to the IHG portfolio means that the group will have representation in both the midscale extended stay segment, as well as the upscale extended stay market with the Staybridge Suites offering.
The two-part transaction involves three parties: IHG; Candlewood Hotel Corporation (CNDL); and Hospitality Properties Trust (HPT). IHG will acquire for $15 million in cash the Candlewood Suites brand from CNDL and be licensor on all current and future franchise agreements. IHG will enter into an agreement with HPT, which owns 64 Candlewood Suites hotels and will purchase an additional 12, to manage these 76 properties. The management agreements will be for 25 years with options to extend. The transaction is expected to be earnings enhancing within the first year.
This deal follows two earlier IHG announcements involving HPT. The first was HPT’s purchase of 16 Staybridge Suites and the second the conversion of 14 Summerfield Suites to Staybridge Suites hotels. Once this transaction closes, HPT will own 136 properties managed by IHG.
Commenting on the transaction Richard North, chief executive, InterContinental Hotels Group said:
“This is a very important new development for us. The acquisition of the Candlewood brand gives us the opportunity to make the most of our powerful franchising capability in the Americas to accelerate the growth of what is a high quality, established brand. And it does so without our needing to commit significant capital of our own.”
The transaction is subject to CNDL shareholder approval in December 2003.