Information on the Target

Three Hills Capital Partners ("THCP") is pleased to announce its investment in Castellet Hospitality ("Castellet"), a rapidly expanding budget hotel group based in Marseille. THCP has committed a total of €61.5 million in preferred capital to support Castellet's buy-and-build strategy. This transaction marks THCP's inaugural investment in France, after more than two years of establishing a presence in the market. Castellet’s growth will be further bolstered by its partnership with French family office Sofival, which not only provides additional funding but also brings valuable expertise from managing another hotel group.

Founded in 2017 by CEO Gilles Larrivé, Castellet operates a portfolio of 22 budget and midscale hotels across the South-East of France, including four new acquisitions as part of this deal. The hotels primarily operate under renowned franchise brands such as Accor, Louvre Hotel Group, Marriott, and B&B Hotels. With over two decades of experience in the hospitality sector, Mr. Larrivé has successfully built a robust business in one of the most resilient market segments.

Industry Overview in France

The French hotel industry, particularly the budget and midscale segments, has shown remarkable resilience in the face of economic fluctuations. France remains one of the most visited countries in the world, supporting a thriving tourism sector that drives demand for affordable accommodation options. The growth of domestic and international travel is expected to continue, creating opportunities for hotel operators positioned to capture this market.

In recent years, the budget hotel sector has experienced significant growth, fueled by evolving consumer preferences for cost-effective and quality lodging. This trend has prompted hotel groups to enhance their services while maintaining competitive pricing, thereby attracting a diverse customer base, including business travelers and families.

Furthermore, the increased interest in leisure and staycation travel during and post-pandemic has resulted in a surge in demand for accessible and budget-friendly accommodation. As the economy rebounds, industry analysts expect a strong recovery trajectory for the hotel market, which benefits businesses like Castellet with well-established operational frameworks.

Overall, the landscape for budget hotels in France is favorable, with ample room for expansion as more travelers seek practical and economic lodging solutions, especially in popular tourist regions in the South-East of France.

The Rationale Behind the Deal

THCP's investment in Castellet Hospitality aligns with its strategy of providing tailored capital solutions to high-quality mid-market companies led by exceptional entrepreneurs. By investing in Castellet, THCP aims to support the company's ambitious growth initiatives and its buy-and-build strategy, allowing it to enhance its market presence.

The partnership with Sofival adds further strength to the transaction, bringing additional operational expertise and financial support. With Castellet's established reputation and strong pipeline of acquisition opportunities, inserting preferred capital into this well-positioned company represents a strategic move for THCP.

Information About the Investor

Three Hills Capital Partners (THCP) is an investment firm focused on providing flexible capital solutions to European mid-market companies. With a reputation for backing strong management teams and driving growth initiatives, THCP leverages its extensive experience in various sectors, including hospitality. The firm's fourth fund aims at supporting promising businesses and entrepreneurs capable of realizing their growth potential.

THCP has a track record of successful investments in the hotel sector, previously backing ventures such as Borealis and TVHG. The firm's approach combines operational backing with strategic funding, ensuring that portfolio companies have the necessary resources to thrive in competitive markets.

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The investment in Castellet Hospitality appears to be a sound decision by THCP, considering Castellet's proven track record in the resilient budget hotel segment. With its well-established operational framework and strategic growth plans, the company is well-positioned to capitalize on the increasing demand for affordable accommodation in France.

The inclusion of Sofival as a partner further strengthens the investment's rationale, as their hospitality expertise will enhance Castellet's operational capabilities. This collaboration could facilitate more effective execution of Castellet's buy-and-build strategy, potentially leading to rapid portfolio growth.

Investing in a company like Castellet, which operates within a thriving market and is helmed by an experienced entrepreneur, signifies THCP's commitment to fostering businesses that exhibit long-term growth potential. Furthermore, with a robust pipeline of acquisition opportunities in place, Castellet is poised for an accelerated expansion trajectory.

Overall, this investment not only represents an important milestone for THCP as it makes its entry into the French market, but it also holds promise for both parties to achieve significant success in the dynamic hotel industry.

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