Canadian luxury hotel group Fairmont is to join forces with top Asian hotel brand Raffles in a massive £2b deal.

The acquisition proposal has been put forward jointly by Kingdom Hotels, a trust fund of Saudi financier Prince Alwaleed bin Talal, and the owner of Raffles, Colony Capital.

Fairmont's board unanimously recommended the deal, which is worth US$3.9b (£2.2b) including debt. Under the terms of the deal, both Fairmont and Raffles hotels will continue running as independent brands, with a portfolio of 120 hotels in 24 countries.

Prince Alwaleed is also a personal shareholder in Fairmont, as well as owner of a number of properties managed by Fairmont, such as the Savoy in London.

He said: "We look forward to partnering with Co lony and working with both Fairmont and Raffles' management to take the combined companies to a new level of achievement."

Dominic Murray, director at hotel consultancy CB Richard Ellis, said there was substantial merit in joining the two brands.

"This is cute play from Colony Capital. This is now a 120-strong hotel group with two strong brands, one in Asia and one in North America. It puts a lot more weight behind their ability to expand in the luxury market and develop the brands," he said.

Philip Camble, senior manager of travel, leisure and tourism at KPMG, said this could see the prince shift his development focus from Four Seasons Hotels, where he also has business interests, to Fairmont. "He can't brand everything at the top end as Four Seasons, so it makes sense to badge some as Fairmonts and have an additional luxury brand to target cities with."

Eric Kudlak, European managing director for hotel property advisers Molinaro Koger, added: "This is an indication of the growing interest in the luxury hotel market."

If the offer of US$45 (£25.4) per share is accepted by a two-thirds majority in April, Fairmont will be taken private.

By Emily Manson