News for the Hospitality Executive
|By Jim Butler, Hotel Lawyer, Author of www.HotelLawBlog.com
December 27, 2006
Over the past two days, the shares of InterContinental Hotels Group Plc – which describes itself as “the world's biggest lodging company” – rose substantially, fueling speculation that it has become a takeover target. The shares are up approximately 8% since December 22, 2006 (and 49% for 2006). Citing the Guardian, Bloomberg says there are rumors of a buyout firm making an offer at a “significant premium” to current stock prices. Some think a € 5.7 billion (U.S.$11.2 billion) offer may be made.
Who are the likely buyers? Aside from the financial aspects of the takeover, what does the interest in InterContinental mean? How does this play into the big push into international hotel investments I have been talking about on www.HotelLawBlog.com in some of the most recent postings? Or into the power of brands, or the rush to hotel-enhanced mixed-use development?
Who is InterContinental Hotels Group Plc (or IHG as it is often called)?
InterContinental Hotels Group describes itself as “the world’s most global hotel company and the largest by number of rooms.” With more than 3,650 hotels and 543,775 rooms in 100 countries, more than 120 million people stay at the company’s hotels every year.
The “distribution system” of rooms, marketing and operations positions IHG nicely to take advantage of inbound and outbound traffic from many countries as international traffic takes off.
IHG owns some of the most recognized hotel brands in the world, including Holiday Inns (and other Holiday product), Hotel indigo, Crowne Plaza, InterContinental, Staybridge and Candlewood Suites. These brands nicely cover the spectrum of economy to luxury, including extended stay and hip, branded boutique.
IHG’s strategy has been to build the industry’s strongest operating
system focused on the biggest markets and segments where scale really counts.
In fact, 12 countries account for 77% of the global hotel market by rooms,
and IHG has significant scale in most of them.
Who’s got the inside track on a buyout?
According to a Bloomberg report today by Meera Bhatia in Oslo, the three big contenders are Barry Sternlicht’s Starwood Capital Group, Blackstone and Permira Advisers LLP. The Independent is calling Starwood Capital the “favorite” to make a successful bid.
At this point, no one will admit today is Wednesday, much less that they are or are not pursuing anything (or being pursued). But stay tuned, because this could happen fast.
Why the interest in InterContinental now?
Obviously InterContinental has an interesting financial play based on
balance sheet, market share, and future revenue streams.
The lodging industry continues on a very strong pace and is recording all time record RevPAR growth and profits.
But underneath all this is InterContinental’s even greater potential – the inherent value and growth that comes from internationally recognized brands, international market presence, lots of development under way, big profit potential from property ownership, hotel mixed-use development, capitalizing on increased international travel and exploding foreign markets, and leveraging capital with management and branding – as well as brand extension into residential and mixed-use.
Oh yes, and there is quite an infrastructure and operations base in place too, as well as all the human capital.
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|Also See:||Dubai International Capital Acquires Travelodge, Operator of 291 Hotels in the UK, Ireland and Spain, for £675 million / August 2006|
|Private Equity Group Permira and Starwood Hotels Among Possible Bidders for De Vere, Owner of 19 Hotels in Britain / June 2006|
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