NEW YORK, JULY 12 -- The French lodging company Accor SA said today it has agreed to pay about $1.3 billion for Motel 6 L.P. in a deal it said will create the world's largest group of budget motels.
Motel 6 is one of the best-known brand names in economy lodging in the United States, advertising its chain of 554 motels with a folksy charm that emphasizes its low cost and no-frills ambience.
Its radio ads end with the signature, ''We'll leave the light on for you.''
Paris-based Accor already owns more than 850 hotels and 3,000 restaurants in 60 countries, including the growing Formula 1 budget hotel chain in Europe.
The deal marks another hefty return for the buyout specialists Kohlberg Kravis Roberts & Co., which led a group that bought the Motel 6 chain for about $880 million in 1985 and kept a controlling interest after the company went public a year later.
Under the terms of the proposal, Accor said it had agreed to make a tender offer of $22.50 a share in cash for the more than 55 million outstanding Motel 6 partnership units. Payments for preferred stock make up the balance.
An affiliate of Kohlberg Kravis owns more than 50 percent of Motel 6 and the companies said it has agreed to tender its holdings under the offer.
The deal was announced after the stock market closed. Motel 6 units rose $2.62 1/2 a share to $19.25 on volume of 1.5 million shares in trading on the New York Stock Exchange.
Accor said the transaction has been fully financed and its offer is not conditioned on obtaining financing. Motel 6's outstanding debt of about $1 billion is expected to remain outstanding.
The tender offer is expected to begin no later than July 18 and close in August.
Paul Dubrule and Gerard Pelisson, co-chairmen of Accor, said the deal will help their company become the world's preeminent budget hotel company. They said it would give Accor more than 775 economy motels. Its target is to own and operate 2,000 budget hotels.
Motel 6 chief executive Joseph W. McCarthy and his management team were expected to stay on, the French company said, and its headquarters will remain in Dallas.
The founding partners of Kohlberg Kravis, Henry R. Kravis and George R. Roberts, said the deal made sense for both sides. ''It is appropriate at this time, five years after we began the process of transforming Motel 6 into a dynamic, modernized and aggressive economy lodging company, that it become part of a global lodging company with even greater resources and potential,'' they said in a statement.
Kohlberg Kravis and its partners acquired Motel 6 from City Investing Co. in 1985. The company was converted into a publicly traded limited master partnership in 1986 with units offered at $13.50 a share.
A source close to the firm said investors who bought shares at that time will have received over $27 per unit for their investment by the time the Accor deal closes, a 21.5 percent compounded annual rate of return counting both the amount of the tender and the $4.63 a share in cash dividends already paid.
The source said those who invested in the original buyout did even better -- a 38 percent compounded annual rate of return on a $125 million equity investment.
When Kohlberg bought it in 1985, Motel 6 had 378 motels with 42,279 rooms and 7,000 employees. The chain has since grown to 554 motels, 63,765 rooms and more than 11,500 employees.