Hedge fund Marcato: IHG's share price could double through merger

BOSTON, Nov 11 (Reuters) - Activist hedge fund Marcato Capital Management on Tuesday again urged InterContinental Hotels Group to merge with a rival and said a tie-up could help the company's share price more than double.

The $3.5 billion San Francisco-based hedge fund owns a 4 percent stake in the hotel group, which owns the Holiday Inn and Crowne Plaza brands. It publicly released its analysis because the group's board has dismissed the fund's urgings to combine with a larger hotel operator.

An equity combination could deliver a premium upward of 100 percent over IHG's current share price, the hedge fund forecast.

InterContinental's share price jumped 2.78 percent to $40.27 in U.S. trading after the analysis was made public. In London, the shares jumped 3.75 percent.

A merger with a Tier A strategic partner like Starwood, Marriott, Hilton, Wyndham, Hyatt or Accor (Paris: FR0000120404 - news) would create a company with global scale, allow for cost and tax efficiencies and boost the share price and earnings, Marcato said in the analysis.

"Our analysis demonstrates that a combination could result in immediate, significant and abiding shareholder value - much more than is likely to be created under IHG's current business plan," Marcato's founder, Richard McGuire, wrote in an open letter to other IHG shareholders.

A spokeswoman for IHG could not immediately be reached for comment.

After months of trying to persuade IHG to consider a tie-up, Marcato in August hired Houlihan Lokey as a financial adviser.

A U.S.-based hotel operator had earlier approached InterContinental, a person familiar with the matter said.

In the letter, McGuire wrote: "IHG has dismissed our suggestions and it appears they have neither solicited offers nor performed the rigorous analysis necessary to evaluate potential options to achieve this goal."

Other investors include Fidelity Management and JP Morgan Asset Management.

McGuire, a former partner at William Ackman's Pershing Square Capital Management, has returned an average 10 percent per year since launching Marcato four years ago.

(Reporting by Svea Herbst-Bayliss; Editing by Dan Grebler)