Activist hedge fund calls on IHG to consider takeover bid
Activist hedge fund Marcato Capital Management has revealed itself as one of InterContinental Hotels Group’s biggest shareholders and called on the group’s management to seriously consider a takeover bid.
Marcato, a San Francisco-based activist fund that owns about 3.8 per cent of IHG, called on management to appoint advisers to look at a tie-up with a larger rival.
The move by Marcato makes it the fifth-largest shareholder in IHG and comes after reports that the hotel group spurned a £6bn approach earlier this year.
The takeover speculation has left the group’s shares trading at an all-time high. Thursday’s statement pushed shares another 1 per cent higher to £23.31, giving the Holiday Inn owner a market capitalisation of just under £6bn.
Marcato founder and managing partner Mick McGuire said: “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.”
“We strongly encourage InterContinental Hotels Group’s board of directors to explore such a combination and engage advisers to conduct a formal process to ensure it evaluates the full range of opportunities available to maximise value.”
Marcato is a “relatively new” shareholder and gave IHG’s management just a few minutes notice before putting out the plea on Thursday, said one person familiar with the situation.
Mr McGuire set up Mercato in 2010 after working with Bill Ackman at Pershing Square. Marcato came to prominence when it took a large stake in auction house Sotheby’s – alongside Third Point, the hedge fund run by activist investor Dan Loeb – and pressed it to return more cash to shareholders.
IHG has maintained a policy of giving cash back to shareholders through share buybacks and both regular and special dividends, helping it to return more than $10bn over the past decade.
Under the leadership of chief executive Richard Solomons, IHG has gone for an “asset light” strategy – selling the hotels it owns in return for long-term management contracts and returning the proceeds to shareholders.
IHG stepped up cash returns earlier this month, with a $750m special dividend after the sale of Mark Hopkins hotel in San Francisco and the InterContinental New York.
Mr Solomons was finance director at the group before becoming chief executive. He is seen as a “safe pair of hands”, whose lack of ego would be conducive to reaching a deal if it benefited shareholders, said one person familiar with the company.
IHG declined to comment, while Marcato could not be reached for further comment.