InterContinental Hotels Group has been urged to seek a merger partner after major shareholder Marcato Capital Management went public with its concerns that IHG are missing a golden opportunity to enhance long-term shareholder value.
The San Francisco-based hedge fund owns 4% of IHG’s outstanding shares and has recommended the board consider opportunities in mergers and acquisitions.
Marcato said IHG ‘dismissed suggestions’ to look at potential options, following reports of a $10 billion offer that was ‘quickly rebuffed.’
In an open letter to fellow shareholders, Marcato said it was "concerned that the board was not giving due consideration to the strategic alternatives available in the current industry."
"After a comprehensive strategic review of the business, IHG will not be able to provide shareholder value comparable to what could be achieved through a combination with another major hotel operator," it said.
Marcato concluded a merger could produce a 100% premium above the current share price.
"This is a unique and ideal time for IHG to consider strategic alternatives — the hospitality industry and M&A environment are both strong, interest rates are at record lows, and we believe there is likely to be interest from several potential strategic partners."
In response to Marcato’s actions, IHG released a statement saying: "IHG met Marcato on September 22, 2014, and October 29, 2014, and reviewed its analysis. Following this review, the board has 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."
