A partnership of Colony Capital and Prince Alwaleed bin Talal of Saudi Arabia on Monday clinched an agreement to buy Canada’s Fairmont Hotels & Resorts for $3.9bn including debt, creating a powerful new force in the global business for luxury hotels.

Fairmont’s properties, including the Savoy in London and the Fairmont in San Francisco, will be combined with the portfolio of the Singapore-based Raffles hotels chain, which was acquired by Colony last year for $1bn. Both hotel brands will retain their independent identities.