The race to evade US taxes by large corporations has landed on the doorstep of a quintessential Middle American hotel brand: Holiday Inn.

marcato capital holiday inn

Marcato Capital pressures InterContinenal Hotels Group

Under pressure to “unlock shareholder value” from the hedge fund Marcato Capital Management, British-based InterContinental Hotels Group Plc (ADR) (NYSE:IHG), which owns the Holiday Inn and Crowne Plaza brands, is under pressure to offer up the two American hotel chains in order to allow a larger US hotel chain to engage in a tax “inversion,” according to reports.

In a tax inversion, a US company purchases a smaller firm located offshore then “moves” their taxable domain to the more favorable tax domicile. If a US firm purchased Holiday Inn and Crowne Plaza it could engage in such a tax maneuver.

The New York Times reporting that Marcato hired investment banker Houlihan Lokey to conduct a strategic review “for enhancing shareholder value” at InterContinental.

Marcato needs to hurry, as US legislators are considering closing loopholes for those seeking to evade US taxes, and reading between the lines of their statements Marcato likely knows this.

“Marcato believes current, favorable market conditions presently exist to significantly enhance IHG shareholder value, which may not be available in the future.”

Value of Holiday Inn And Crowne Plaza

If Holiday Inn and Crowne are currently sold at a premium it is likely due to the fact they could help US companies avoid paying taxes.  When this opportunity is eliminated, the potential value of Holiday Inn and Crowne Plaza is diminished.

As reported in ValueWalk in May, InterContinental turned down offers to purchase the entire company despite the urging of Marcato, which then held a 4 percent stake in the firm.

At the time of the report in May, media reports mentioned the intention of the merger was not just about enhancing the position of the hospitality business.

Aside from the benefits of (IHG) joining ranks with a larger hotel operator there has been speculation that the deal would also let an American competitor benefit from lower corporate tax rates by reincorporating in the UK, Chad Bray from DealBook observed at the time.