Financial News

  • 27 May 2014, 10:58

InterContinental Rebuffs Secret 6bn US Bid

The FTSE-100 hospitality provider InterContinental Hotels Group (IHG) has rejected a secret takeover bid from the US which valued the company at about 6bn.

Sky News has learnt that IHG's board met a few weeks ago to consider the offer, but dismissed it on the grounds that it was too low.

The identity of the bidder was unclear this weekend, although analysts said it may have been Starwood Hotels & Resorts, the owner of the Le Meridien, St Regis and Westin brands, or a specialist investment fund such as Starwood Capital.

Sources said that IHG was braced for the bidder or a rival to return, with US hotel operators understood to be enticed by the prospect of moving their tax domicile to the UK in a process known as a tax inversion.

That mechanism, which allows US companies to avoid paying tax on their overseas cash holdings, has been at the centre of Pfizer's 69bn offer for AstraZeneca, provoking a political outcry on both sides of the Atlantic.

Senior sources said on Saturday that Pfizer was likely to issue a statement on Monday under Rule 2.8 of the City's Takeover Code, which will confirm its intention not to make a formal bid at this stage for its British pharmaceuticals rival.

Pfizer would then be barred from making another approach for six months, although as Sky News revealed this week, AstraZeneca's biggest investor is pressing it to re-open talks with the US company in three months' time.

The recent approach for IHG, which owns brands such as Crowne Plaza, Holiday Inn and its eponymous chain, could fade away and not be revived, according to insiders.

One added that IHG's stock repurchases in the last fortnight meant that it was not involved in live takeover talks.

Starwood Hotels has a market value of just under $15bn (8.9bn), while IHG is capitalised at 5.6bn.

The British group is chaired by Patrick Cescau, a former boss of Unilever, and run by Richard Solomons, who has pleased investors with a series of large capital returns.

These have been generated by the sale of many of its flagship hotel properties, including most recently sites in San Francisco and New York, as IHG shifts its business model to hotel management rather than ownership.

IHG still owns the LeGrand Paris and InterContinental Hong Kong, but is also expected to sell these properties and return hundreds of millions of pounds more to shareholders.

It has also been accelerating the expansion of its pipeline of new hotels, with 237 locations opened last year and 444 more added to its roster of future openings.

The company operates about 5% of the world's hotel rooms but has more than twice that volume of the industry's known slate of new rooms.

Last year, IHG reported pre-tax profits of 600m, a 10% rise on the previous year.

Its future growth will be driven by emerging markets, with Hualuxe, a premium brand aimed at Chinese customers, launched in 2012.

A spokeswoman for IHG, shares in which closed up 0.3% on Friday at 2226p, declined to comment.

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