Activist hedge fund Marcato Capital Management has urged InterContinental Hotels Group to merge with a rival and said a tie-up could help the company’s share price more than double.
The $3.5 billion San Francisco-based hedge fund owns a 4% stake in the Holiday Inn and Crowne Plaza parent company.
But IHG has rejected the call, having met with Marcato twice in recent months and reviewed the hedge fund’s analysis.
“Following this review the board concluded that it remains in the best interests of all its shareholders to continue to pursue its current strategy for high-quality growth and delivering strong operational and financial performance,” IHG said.
A merger with a strategic partner like Starwood, Marriott, Hilton, Wyndham, Hyatt or Accor would create a company with global scale, allow for cost and tax efficiencies and boost the share price and earnings, the 77-page Marcato analysis said.
“Our analysis demonstrates that a combination could result in immediate, significant and abiding shareholder value – much more than is likely to be created under IHG’s current business plan,” Richard McGuire, Marcato’s founder, wrote in an open letter to IHG shareholders.
An equity combination could deliver a premium upward of 100% over IHG’s current share price, the fund forecast.
IHG’s US share price jumped 3% to $40.36 in early afternoon trading after the analysis was made public yesterday. In London, the shares ended up 3.4%, Reuters reported.
IHG reportedly spurned a $10 billion approach from a US rival in May, believed to be Starwood Hotel, owner of the Sheraton and Westin brands, or Wyndham, which includes the Ramada and Days Inn.