OYO Acquires Blackstone-Owned G6 Hospitality For $525 Mn

SUMMARY

The deal is expected to close in the fourth quarter of 2024, subject to customary closing conditions, the company said in a statement

With this buyout, OYO aims to leverage its technology, global distribution network, and marketing expertise to enhance the Motel 6 and Studio 6 brands, driving sustained financial growth

Today, Motel 6’s franchise network generates gross room revenues of $1.7 Bn, providing G6 with a strong fee base and consistent cash flow, as per the company’s statement

OYO’s parent company, Oravel Stays Ltd, has expanded its footprint in the US by agreeing to acquire G6 Hospitality, the parent entity of Motel 6 and Studio 6 brands, from Blackstone Real Estate for $525 Mn (around INR 4382.72 Cr) in an all-cash transaction.

The deal is expected to close in the fourth quarter of 2024, subject to customary closing conditions, the company said in a statement.

With this buyout, OYO aims to leverage its technology, global distribution network, and marketing expertise to enhance the Motel 6 and Studio 6 brands, driving sustained financial growth.

Motel 6 was founded in 1962 and Blackstone acquired the company from the French lodging giant Accor SA in 2012 at a $1.9 Bn deal.

Today, Motel 6’s franchise network generates gross room revenues of $1.7 Bn, providing G6 with a strong fee base and consistent cash flow, as per the company’s statement.

A report from Bloomberg also stated that Oyo is expecting to operate Motel 6 as a separate entity.

Under Blackstone’s ownership, substantial capital was invested to enhance the Motel 6 brand. This included executing a strategy to transform the business into a leading asset-light lodging company, boasting a franchise network of around 1,500 hotels across the United States and Canada.

“This acquisition marks a significant milestone for a startup like us, as it strengthens our international presence. Motel 6’s strong brand recognition and network in the US, combined with OYO’s entrepreneurial spirit, will be instrumental in charting a sustainable path forward. The company will continue to operate as a separate entity,” OYO International’s CEO Gautam Swaroop said.

G6 Hospitality President and CEO Julie Arrowsmith added, “We are thankful for our successful partnership with Blackstone, which has transformed us and positioned G6 well for this next chapter. OYO’s innovative approach to hospitality will allow us to enhance our offerings while maintaining the iconic Motel 6 brand, trusted by travelers for over six decades.”

Rob Harper, Blackstone’s Head of Real Estate Asset Management Americas, remarked, “This transaction is a great outcome for our investors, representing the culmination of a business plan that more than tripled their capital and generated over $1 billion in profit. G6 is well-positioned for the future, and we look forward to seeing its brands continue to succeed.”

Goldman Sachs & Co. LLC acted as Blackstone’s lead advisor, with Jones Lang LaSalle Securities, LLC, and PJT Partners also serving as financial advisors. Simpson Thacher & Bartlett LLP acted as Blackstone’s legal advisor.

Blackstone is the largest owner of commercial real estate globally. Its real estate business was founded in 1991 and has US $336 Bn of investor capital under management.

It is pertinent to note that OYO has been expanding its US operations since its launch in the region in 2019. The company now operates over 320 hotels across 35 states. In 2023, OYO added nearly 100 hotels to its US portfolio and plans to add another 250 by 2024.

In recent times, OYO has looked to bolster its presence in Europe and the US, where the company earns higher revenue due to larger ticket sizes.

In total, Oyo claims to offer over 40 integrated products and solutions to patrons who operate above 157K hotel and home storefronts in more than 35 countries including India, Europe, and Southeast Asia.

The development comes at the heart of the company turning profitable in the financial year 2023-24 (FY24) by curbing expenses through trimming its employee costs.

The unicorn posted a net profit of INR 229.5 Cr during the year as against a net loss of INR 1,286.5 Cr in the previous financial year. OYO announced last month that it became profitable in FY24.

However, its revenue from operations stood at INR 5,388.7 Cr in FY24, a decline of 1.3% from INR 5,463.9 Cr in the previous fiscal year, as per its filings with the Ministry of Corporate Affairs.

Its founder Ritesh Agarwal has also outlined that the company looking to triple its profit after tax to INR 700 Cr in FY25.

For this, OYO raised INR 1,457 Cr (around $175 Mn) led by Agarwal floated Singapore-based entity Patient Capital, along with J&A Partners and ASK Financial Holdings in August. The round also included INR 417 Cr investment from Incred announced in July.