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French hotelier Accor SA is selling its budget chain Motel 6 to Blackstone Group LP (NYSE:BX) to raise cash to retire debt and expand in other high growth areas such as the Asia-Pacific, Latin America, and Europe.
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The sale will enable Accor to reduce its debt by 330 million euros, but will entail an accounting loss of 600 million euros due to premature buyouts of fixed lease Motel 6 hotels.
Accor had attempted to change the Motel 6 chain from its model of owned premises to a franchise-based business model, in line with its overall corporate strategy. The chain had lost money in 2010, and done only marginally better in 2011, though it still underperformed the company as a whole.
“This deal will provide Accor with additional resources to address the tremendous growth potential in the Asia-Pacific region, in Latin America and in Europe, where the leadership of our brands is one of the key drivers of our future growth,” Accor Chief Executive Denis Hennequin said in a statement. Accor will remain present in the U.S, through its upscale Sofitel and Novotel brands.