InterContinental Shareholder Marcato to Review Strategy

Marcato Capital Management LP, owner of about 4 percent of InterContinental Hotels Group Plc, hired a financial adviser to help it conduct a strategic review of Europe’s second-largest publicly traded hotel operator.

Investment bank Houlihan Lokey will assist with the review, which will focus on ways of enhancing shareholder value, including improving capital structure and “strategic transactions,” Marcato said in a statement today. The San Francisco-based hedge fund said it intends to engage in direct dialogue with InterContinental regarding its proposals, as well as hold “broad discussions” with shareholders and “industry participants.”

InterContinental Chief Executive Officer Richard Solomons said in a June interview that the Denham, England-based hotel company can grow without a merger or takeover and it has served investors well. The company is seeking to expand in the mid-priced segment in the U.S. as well as in places such as China, Russia and India, and to increase awareness of the InterContinental name, Solomons said.

“We grow the business and continue to grow it through brand expansion and by introducing our brands to new markets,” Solomons said in June. “We’ve done deals. We’ve launched brands. Ultimately, IHG has created a ton of value and returned a ton of shareholder value.”

Zoe Bird, an InterContinental spokeswoman, declined to comment on Marcato’s plans for the review.

Offer Rejected

Sky News reported on May 24 that InterContinental received a bid that valued the company at 6 billion pounds ($10.1 billion). The hotel operator rejected the offer, from a U.S. company, as too low, according to Sky News, which didn’t say where it got the information or identify the suitor.

Marcato, responding to the report, said in a May 29 statement 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.”

An overseas takeover could have tax advantages. In a tactic known as tax inversion, a U.S. acquirer may buy a foreign company and change its headquarters to the target’s domicile. The combined entity then would pay taxes in a country where the rate may be lower.

InterContinental, owner of the Holiday Inn and Crowne Plaza brands, is due to report half-year results tomorrow. The company’s first-quarter revenue beat analysts’ expectations as it benefited from growing demand for lodging in the Americas, which account for about half its sales.

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