After InterContinental Hotels Group PLC (ADR) (NYSE:IHG) (LON:IHG) reportedly turned down a $10 billion bid from an unnamed US company, activist hedge fund Marcato Capital Management LP issued a statement saying that the hotel chain should be on the lookout for a similar deal. And now that his interest is sparked, it wouldn’t be surprising if Marcato Capital founder Mick McGuire starts looking for a good deal to propose on his own.
Marcato Capital – InterContinental Hotels merger could ‘reshape the global hospitality industry’
“We believe that a combination with a larger hotel operator would have compelling strategic and financial merit and represents a unique opportunity to reshape the global hospitality industry,” McGuire said in a statement. “We strongly encourage Intercontinental Hotels Group’s Board of Directors to explore such a combination and engage advisors to conduct a formal process to ensure it evaluates the full range of opportunities available to maximize value.”
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According to the statement, Marcato Capital owns 3.8% of InterContinental Hotels Group PLC (ADR) (NYSE:IHG) (LON:IHG), so this isn’t an idle suggestion. McGuire didn’t go into details on why he initiated a position on Intercontinental in the first place, but whether he had already intended to look for M&A opportunities involving the company or was inspired by the news reports his suggestion to ‘engage advisors’ sounds like an invitation to meet with management and start discussing options.
Aside from the benefits of 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, reports Chad Bray for DealBook.
McGuire is an established activist investor with ties to Ackman, Loeb
Marcato Capital is still just a few years old, founded in 2010 when McGuire decided to leave Pershing Square Capital Management and branch out on his own, but it has already established itself as a top notch hedge fund. Considering that Marcato Capital and Pershing Square cooperated on an activist campaign involving Alexander and Baldwin & Co., there doesn’t seem to be any bad blood between the former colleagues, and Marcato recently sided with Dan Loeb’s Third Point LLC during the Sothebys (NYSE:BID) proxy contest.
Before dismissing his suggestion, InterContinental Hotels Group PLC (ADR) (NYSE:IHG) (LON:IHG) management has to decide if it’s willing to fight a campaign against a rising activist investor who can pitch his idea to the hedge fund industry’s biggest names.