A takeover bid for IHG

There’s nothing like a bit of M&A news flow to bring about some excitement. This time, the focus is on InterContinental Hotels Group (IHG), owner of brands including Crowne Plaza and Holiday Inn.

Shares of IHG are up 4.6% (at time of writing) on the back of reports that suggest the company has recently received – and rebuffed – a takeover approach.

According to reports, IHG recently received a £6bn takeover bid, but, rejected the offer on valuation grounds.

The current buzz is based on expectations that an improved offer may well be on the horizon; not to mention the potential for other interested parties to join the fray, with potential tax benefits having been cited as a possible motivating factor for a US acquirer.

While there’s been talk that the current suitor is US-based, its identity remains something of a mystery. That hasn’t stopped the market from speculating, however.

US-based, Starwood Hotels – owner of the Sheraton, Westin and St. Regis brands, among others – has been suggested as the possible suitor.

Such a scenario would certainly deviate from Starwood’s deal-making trend: the company hasn’t been terribly acquisitive of late, and, a potential IHG acquisition would rank as the company’s biggest (certainly over recent years).

That said, the fact that Starwood has been actively ramping up its global footprint of late means there could well be merit to such talk.

Earlier this month for instance, the company announced plans to open 35 hotels in the Middle East over the next three years, with seven new hotels set to be opened in the region this year. And financially, Starwood does have the financial flexibility to muster a bid, should the company choose.

Of course, other potentially viable suitors exist.

IHG’s had something of a good run recently…

The company’s performance has been improving lately. Earlier this month for instance, the market cheered following IHG’s latest results, which showed decent performance.

For its first quarter, the company boasted a 6% growth in global revenue per available room (RevPAR), helped by a 2.4% rise in occupancy and a 1.9% increase in average daily rate.

By region, the company’s core Americas operations, as well as Europe, both performed particularly well, posting RevPAR growth of 6.6% and 6.1% respectively.

Meanwhile, the company, which has started shifting focus from owning hotels to managing them, kept shareholders sweet by announcing that it will dole out $750m via a special dividend, using proceeds from its latest asset disposals. Similar moves are expected in the future.

That saw the company share’s soar some 8% on the day, bringing the total ascent this year (prior to today’s jump) to around 17%.

And all of that means that the company could be well positioned to negotiate a decent premium, assuming there’s any merit to the latest reports.

Indeed, whether there’s any truth to this latest news flow remains to be seen but, by the looks of it, there’s some market expectation that this story hasn’t quite ended.