InterContinental Denies Report of Starwood Merger Talks

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InterContinental Hotels Group Plc said it isn’t in merger talks with Starwood Hotels & Resorts Worldwide Inc. after the Financial Times reported that negotiations had taken place.

InterContinental, based in Denham, England, was up 4.6 percent at 2,743 pence at the close of trading in London, giving the company a market value of 6.5 billion pounds ($10.1 billion). Starwood, based in Stamford, Connecticut, fell 5.4 percent to $78.20 at the close in New York, the biggest one-day decline in nine months.

“Following recent market speculation, the board of directors of IHG states that it is not in talks with Starwood with a view to a combination of the businesses,” InterContinental said in a statement.

A Starwood acquisition of InterContinental would create the world’s largest hotel operator, with more than 1 million rooms in 100 countries. The talks are tentative and Starwood may chose a different partner or follow another strategy, the Financial Times reported, citing two people familiar with the discussions.

Starwood spokeswoman Carrie Bloom declined to comment on the Financial Times article.

Following that report, Reuters said Starwood had reached out to both InterContinental and Wyndham Worldwide Corp., which has 667,000 rooms in 70 countries. Its brands include Ramada and Travelodge. Citing people familiar with the matter, Reuters reported that Starwood has also approached sovereign wealth funds.

“We don’t comment on market rumors or potential M&A,” Wyndham spokeswoman Margot Happer said.

Strategic Alternatives

Starwood in April said it was exploring strategic and financial alternatives to increase shareholder value. That fueled speculation that it may bid for InterContinental, which has been considered an acquisition target for more than a year.

Shareholder Marcato Capital Management LP, criticizing InterContinental’s management, last year called for a merger, arguing that could double the company’s valuation.

Starwood and InterContinental reported earnings today. Starwood’s second-quarter adjusted earnings of 84 cents per share beat a Bloomberg analyst estimate of 74 cents. InterContinental’s first-half net income climbed to $205 million from $162 million a year earlier.

“We never comment on speculation, and if somebody makes an offer, we’re a British company, and we’d consider it,” InterContinental Chief Executive Officer Richard Solomons said in an interview on Bloomberg Television on Thursday. Solomons made the comments following the company’s first-half earnings release, before the Financial Times published its article.

InterContinental and Starwood have both been moving to cut real estate holdings to focus on property management and franchising. In November, Starwood sold its Sheraton on the Park in Sydney to China’s Sunshine Insurance Group.

InterContinental this month agreed to sell the InterContinental Hong Kong to a group of investors advised and managed by Gaw Capital Partners for $938 million.

(An earlier version of this story corrected a reference to a Reuters report.)