Marcato Capital Management, the activist hedge fund headed by Mick McGuire is pressing InterContinental Hotels Group PLC (ADR) (NYSE:IHG) to explore a merger deal, which could double its stock value.
InterContinental Hotels Group PLC (ADR) (NYSE:IHG) operates nine hotel brands including the Holiday Inn, Crown Plaza, Candlewood and Staybridge Suites and others.
Marcato Capital Management is one of the largest shareholders of InterContinental Hotels Group PLC (ADR) (NYSE:IHG) with approximately 4% stake in the hotel group is worth around $3.5 billion.
Marcato concerned over IHG’s board
Marcato Capital expressed that it is becoming more concerned that the board of directors of InterContinental Hotels Group PLC (ADR) (NYSE:IHG) was not giving due consideration to strategic alternatives currently available in the industry.
The activist hedge fund cited media reports that the board of the hotels group immediately rejected a £6 billion unsolicited offer.
Marcato Capital emphasized that it intends to engage in a constructive dialogue with the board of InterContinental Hotels Group PLC (ADR) (NYSE:IHG) regarding the process to explore options to enhance shareholder value over the long-term.
Marcato Capital said the IHG’s board of directors dismissed its suggestions and appears that “they have neither solicited offers nor performed the rigorous analysis necessary to evaluate potential options.”
Marcato identified Tier A strategic partners for IHG
Marcato Capital identified six “Tier A” strategic partners for InterContinental Hotels Group PLC (ADR) (NYSE:IHG) including Starwood, Marriott, Hilton, Wyndham, Hyatt and Accor.
The activist hedge fund believed that a merger with any those companies could create a powerful and diversified hotel management company with significant global scale.
McGuire 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.”
Marcato Capital estimated that an equity combination could deliver a premium upwards of 100% of the current stock price of the hotel group. The shares of InterContinental Hotels Group PLC (ADR) (NYSE:IHG) are currently trading around $40.13 per share.
IHG’s response
The board of directors of the hotel group said it maintains an active dialogue with its shareholders and welcomes their feedbacks. IHG added that its board regularly considers all options to drive shareholder value.
According to IHG, its board met twice with Marcato Capita, reviewed its analysis and concluded that it “remains in the best interest of all shareholders to continue to pursue its current strategy…”
