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Can Accor Afford The Luxury To Buy FRHI

10 December 2015 by lberuti

Yesterday, ACCOR ( Accor SA ) announced towards the close of the session that they were moving closer to buying FRHI, the owner of the luxury Fairmont, Raffles and Swissotel brands, for more than $2.5bln. ACCOR’s 5 year risk premium got initially punished, and it closed yesterday 10bps wider at 108bps. The deal was confirmed overnight for $2.9bln, but the company also announced that the purchase will be partly funded with the issuance of new stocks to FRHI owners, and that only $840mln will be paid cash. So despite a relatively soft tone in the credit market generally speaking (in an environment of resilient equities, so one can only wonder where credit indices will be trading if equity markets come under renewed pressure), ACCOR’s 5 year CDS risk premium closed 6bps tighter at 102bps.