LONDON — InterContinental Hotels Group (NYSE: IHG) has agreed to acquire Kimpton Hotels & Restaurants (Kimpton) for $430 million in cash, creating the world’s largest boutique hotel business.
Kimpton manages 62 hotels in 28 cities, including Hotel Palomar locations in Phoenix, Los Angeles and Washington; and Hotel Wilshire in Los Angeles, with 16 more in the development pipeline. The 16 hotels will include 3,000 rooms, and 10 hotels are already under construction.
The company operates 71 hotel-based destination restaurants, bars and lounges. Kimpton is widely regarded as a sophisticated food and beverage operator.
“Kimpton has created a portfolio of world-class hotels and destination restaurants, and the distinctive and innovative Kimpton brand will fit perfectly into the IHG brand family,” says Richard Solomons, CEO of IHG. “Adding Kimpton to our portfolio of preferred brands creates the world’s largest boutique hotel business.”
Following the transaction, IHG plans to capitalize on its scale, global owner networks, digital platforms and specialist capabilities of building preferred brands to enhance Kimpton’s growth globally. According to a release, there is a significant opportunity to expand the brand in Europe and Asia where there is strong demand for boutique brands.
San Francisco-based Kimpton has achieved 4 percent growth annually in system size and 7.7 percent average growth in comparable same-store revenue per available room (RevPAR) in the last five years. Its EBITDA is expected to be approximately $20 million for 2014, and IHG expects to grow this by 2017 to approximately $39 million.
“Kimpton and IHG have many things in common, not least our shared values and approach to building brands,” says Mike Depatie, CEO of Kimpton. “As an owner of a significant number of Kimpton hotels through our real estate investment funds, I am committed to developing additional Kimpton hotels and I look forward to seeing Kimpton go from strength to strength as part of IHG.”
The transaction is expected to close during the first quarter of 2015. BofA Merrill Lynch acted as financial adviser to IHG.
IHG’s portfolio of nine hotel brands includes InterContinental Hotels & Resorts, Hotel Indigo, Crowne Plaza Hotels & Resorts, Holiday Inn Hotels & Resorts, Holiday Inn Express, Staybridge Suites, Candlewood Suites, EVEN Hotels and HUALUXE Hotels and Resorts. The company franchises, leases, manages or owns more than 4,700 hotels and 697,000 guest rooms in nearly 100 countries, with nearly 1,200 hotels in its development pipeline.
Kimpton was established in 1981. Its accolades include Fortune Magazine’s “100 Best Companies to Work For” in five of the last six years and the number one company for Guest Satisfaction for North American Upper Upscale Hotel Brands by J.D. Power in 2013 and 2014.
IHG’s stock price closed at $37.63 per share on Monday, Dec. 15, up from $31.07 a year ago.
— Scott Reid