InterContinental Hotels Group has reached an agreement to acquire Kimpton Hotels & Restaurants for $430 million, and the multibrand hotel giant plans to ramp up Kimpton's growth in the United States and elsewhere.
The acquisition brings Kimpton's 62 U.S. hotels into the IHG family of more than 4,700 hotels, with almost 700,000 rooms around the world. In a Tuesday conference call with investors to discuss the deal, IHG CEO Richard Solomons said adding the boutique, upper upscale Kimpton brand fills a "white space" in the company's brand portfolio. He called it a "strong strategic fit" with IHG's Hotel Indigo brand, a boutique brand at the upscale price point, and IHG's recently launched Even brand, which is centered on health and fitness. Together, those brands would allow IHG to "create the [industry's] leading lifestyle boutique business," Solomons said.
Kimpton COO Mike DeFrino will lead the Kimpton team following the acquisition, according to IHG. Additionally, IHG plans to use Kimpton's "market-leading research on restaurants and bars" in its other brands, Solomons said.
Kimpton, meanwhile, had "reached a stage where it needed a scale player to take it to the next phase of its growth," he said. Currently, Kimpton has 16 hotels in its pipeline, 10 of which are under construction. IHG plans to accelerate that growth and launch it outside of the United States, particularly in Europe and Asia.
In the Tuesday call, Solomons said that growth abroad still might be a few years out, though he already has fielded calls from owners interested in expanding the brand to those regions.
Baird Equity Research in a note on the transaction wrote that "IHG has shown a willingness to grow its lifestyle brands using its well-capitalized balance sheet; additionally, the Kimpton Real Estate Investment Funds, which are run by four existing Kimpton executives and currently own about 30 percent of the brand's existing and pipeline properties, are committed to growing the brand through future investments."
Current Kimpton CEO Mike Depatie is stepping down from his position to focus on managing the real-estate funds, according to The Wall Street Journal.
Besides those owned by the Kimpton Real Estate Investment Funds, Kimpton's other properties are owned by third parties including Pebblebrook Hotel Trust and LaSalle Hotel Properties. While those owners have change-of-control provisions in their management agreements, the Baird note speculated that those owners already have approved the transaction.
With its first hotel opened in 1981, Kimpton has been a growing force in competition for corporate travel business, especially since it began aggressive expansion on the U.S. East Coast in 2001. Corporate travel buyers in 2013 named it the top upper upscale brand in BTN's Hotel Chain Survey.
This is IHG's first brand acquisition since the 2003 acquisition of midprice extended stay Candlewood Suites, Solomons said. IHG expects to close the deal in the first quarter of 2015, pending antitrust clearance and approval from Kimpton shareholders.