Starwood, IHG Talk Possible Merger: Reports

STAMFORD, CT—Starwood Hotels & Resorts Inc., headquartered here, has held preliminary discussions with Intercontinental Hotels Group Plc about a possible merger, according to published reports. Bloomberg Business reported Thursday that shares in IHG jumped after the Financial Times carried a story on merger talks.

Starwood did not respond to GlobeSt.com's request for commentby deadline early Thursday afternoon; a spokeswoman for IHG  tells GlobeSt.com the company is "not in talks with Starwood with a view to a combination of the businesses." During an interview on Bloomberg Television Thursday, IHG CEO Richard Solomons had said that his company does not comment on speculation.

Citing two sources said to be familiar with the matter, the FT reported Thursday that the talks were “very tentative” and that Starwood might choose another merger partner or pursue a different strategy. It's not clear whether the company is also in discussions with other parties, the FT reported.

A merger of Starwood, which owns brands including Sheraton, St. Regis and W Hotels, and IHG, whose brands include Holiday Inn and Crowne Plaza, would create the world's largest hotelier and the third largest by market value, after Hilton Worldwide Holdings and Marriott International Inc. The combined company's portfolio would encompass more than one million rooms in 100 countries.

This past April, Starwood said it had hired Lazard to help it explore “a full range of strategic and financial alternatives to increase shareholder value,” including a possible sale. Calling it “a time of enormous opportunity and change in our industry,” Starwood chairman Bruce W. Duncan said at the time that “no option is off the table.”

Although IHG on Thursday reported a 5.1% increase in global RevPAR and a 9% increase in operating profit for the first six months of 2015, the company faced pressure last year from investor Marcato Capital Management to seek a merger partner. “This is a unique and ideal time for IHG to consider strategic alternatives,” according to a November 2014 letter over the signature of Marcato managing partner Richard McGuire. It listed Starwood among half a dozen hotel companies with which IHG could join forces; the others were Marriott, Hilton, Wyndham Hotel Group, Hyatt and Accor S.A.