A merger of the country's two biggest accommodation providers would create a local hotel giant with a national portfolio of more than 300 hotels, a dozen or so brands and in excess of 50,000 rooms – about five times bigger than its nearest competitor, franchisor Choice Hotels.
Accor's indicative and non-binding proposal to acquire Mantra Group at $3.96 a share was at a 23 per cent premium to Mantra's Friday closing price of $3.23, and valued the business at $1.17 billion.
Mantra Group, which operates more than 125 properties and in excess of 21,500 rooms under its Mantra, Peppers and Breakfree brands, said it had granted Accor access to due diligence "to determine if a transaction can be agreed and recommended unanimously by the Mantra board".
It was worth less than half this when it floated in June 2014 at $1.80 a share.
Since then, a tourism boom and rapid growth has lifted Mantra, though its share price is still well off its December 2015 peak of $5.05 a share.
The approach from Accor, which operates more than 4100 hotels and almost 600,000 hotel rooms around the world and more than 30,000 rooms in Australia, follows a wave of global hotel company mergers driven by the growth of online booking platform Airbnb and the increased market power of online travel agents such as Expedia and Booking.com.
Last year's global $17 billion merger of Marriott and Starwood created the world's biggest hotel company with around 1.2 million rooms.
Locally, amid a China-led tourism boom, Australia's hotel sector is booming with occupancy rates near 90 per cent in Sydney and Melbourne, a wave of new brands coming into the country and all the major players undertaking big development pipelines.
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