Marcato Asks IHG to Find Merger Partner

SAN FRANCISCO—Activist shareholder Marcato Capital Management on Tuesday reiterated its call for Intercontinental Hotels Groupto seek a merger with another large operator in the sector. In a letter and presentation to IHG shareholders, locally based Marcato identified six potential merger partners for the world's largest hotelier: Starwood Hotels & Resorts, Marriott, Hilton Worldwide Holdings, Wyndham Hotel Group, Hyatt and Accor S.A.

“This is a unique and ideal time for IHG to consider strategic alternatives,” according to the letter over the signature of Marcato managing partner Richard McGuire. “The hospitality industry and M&A environment are both strong; interest rates are at record lows; there are substantial revenue and expense synergy opportunities; and we believe there is likely to be interest from several potential strategic partners.”

Marcato is among IHG's largest investors, controlling about 4% of its outstanding shares. IHG operates seven brands, including Holiday Inn and Crowne Plaza, and 4,700 properties globally.

This past summer, after published reports that the UK-based IHG had rejected an unsolicited $10.1-billion takeover offer, Marcato hired Houlihan Lokey to conduct a strategic review. Based on the review, Marcato concluded that “on a standalone basis, IHG will not be able to provide shareholder value comparable to what could be achieved through a combination with another major hotel operator,” wrote McGuire. “In fact, based on reasonable assumptions, Marcato found that an equity combination could deliver a premium upwards of 100% over IHG's current share price.”

This past May, McGuire opined that a combination between IHG and another large rival would have “compelling strategic and financial merit,” representing “a unique opportunity to reshape the global hospitality industry.” A UK-based IHG spokeswoman did not respond to GlobeSt.com's requests for comment by early Tuesday afternoon.