Hospitality Franchise Systems Acquires Century 21 Real Estate Corporation

Strategic Insights -

Hospitality Franchise Systems, Inc. (NYSE: HFS), a leading hotel franchising company, and Metropolitan Life Insurance Co. have reached an agreement for the purchase of Century 21 Real Estate Corporation. This acquisition expands HFS' franchising and brand management expertise into the residential real estate brokerage industry, serving the $600 billion housing market. Century 21, the world's best-known and largest residential real estate sales organization, has approximately 6,000 independently owned and operated franchised offices in 11 countries.

Key Takeaways:

  • The acquisition price is approximately $200 million in cash and stock, plus an additional $30 million contingent on certain levels of U.S. existing home sales during the period 1995-1997.
  • Century 21 has over 4,800 offices nationwide, with franchisees responsible for $90 billion of real estate transactions in 1994, and reported revenues of approximately $130 million.
  • The transaction is expected to close in the third quarter, with the deal subject to completion of due diligence by HFS and customary conditions.
  • HFS Chairman and CEO Henry R. Silverman sees the acquisition as a strategic move to expand into the residential real estate market, citing similarities between the industry and hotel franchising.
  • Silverman also highlighted the potential for increased revenue growth through expansion, preferred vendor relationships, and cross-marketing opportunities.
  • The acquisition is expected to add to HFS' earnings per share and provide revenue diversification.

Statistics:

  • Century 21 has approximately 6,000 franchised offices in 11 countries.
  • The acquisition price is approximately $200 million in cash and stock, plus an additional $30 million contingent on certain levels of U.S. existing home sales.
  • Century 21's franchisees were responsible for $90 billion of real estate transactions in 1994.
  • Century 21 reported revenues of approximately $130 million in 1994.
  • HFS has approximately 4,400 franchised hotels with nearly 430,000 rooms in the United States, Canada, South America, Latin America, and Europe.

Sources:

  • Hospitality Franchise Systems, Inc. press release, June 7, 1995.
  • Metropolitan Life Insurance Co. press release, June 7, 1995.