Two things grabbed the attention of La Quinta (LQI ) investors on Oct. 16, when the lodging company surprised them with news of a corporate restructuring: The Bass family of Fort Worth has held on to its nearly 10% stake in La Quinta, and the company will repurchase up to $20 million worth of stock.
The fact that the Basses haven't unloaded shares--even though they recently sold most of their stake in Walt Disney (DIS ) to meet margin calls--suggests to some pros that the family thinks La Quinta is way undervalued and that it expects to reap huge profits, either through the sale of the entire company or some of its assets. And the stock repurchase signals that management, on the advice of the Basses, may be trying to make La Quinta more attractive as a buyout candidate for other companies, such as Cendant (CD ), whose appetite for hotel chains with a brand name is yet to be satisfied.
Seth Hamot of Costa Bravo Partners, which owns La Quinta shares, says the company's assets are worth $2.5 billion. He figures that a fair value for La Quinta in a buyout is 13 a share. He agrees that Cendant would be the most logical buyer of La Quinta--in large part because of its own hotel properties and the stock's currently depressed price of 4.96 a share.
By Gene G. Marcial