Marcato Checks Out Of FTSE-100 Hotels Giant

The American activist fund manager which demanded that InterContinental Hotels Group (IHG) pursue a mega-merger with a rival has offloaded its £200m stake in the company.

Sky News has learnt that Marcato Capital Management, a San Francisco-based investment firm, sold most or all of its 4% shareholding in the owner of the Crowne Plaza and Holiday Inn brands several weeks ago.

It (Other OTC: ITGL - news) was unclear on Sunday whether Marcato, which declined to comment, had since reinvested in IHG, which is the largest UK-based hotel operator and has a market capitalisation of more than £5.6bn.

However, sources close to the situation suggested that Marcato was no longer an investor in the British company.

They said the activist had sold its stake following a denial by IHG of a report in the Financial Times in late July which said that the UK-based company had held preliminary merger talks with Starwood Hotels & Resorts.

Marcato had made a "significant gain" on its holding in IHG, which operates nearly 5,000 hotels in 100 countries, one of the sources said.

Under UK listing rules, public companies are usually required to notify the market when shareholders with stakes of more than 3% materially increase or reduce their stakes.

However, some investment firms are exempt from this rule, which one source said explained why there had been no notification to the stock market of Marcato’s disposal.

Marcato went public with its desire for IHG to pursue a combination with another hotel operator last November, arguing that the company had a "unique, limited-time opportunity to create significant long-term shareholder value".

Referring to a report by Sky News earlier in 2014 that IHG had been approached about a deal by Wyndhams, another US hotelier, Marcato said it had become "concerned that the [IHG] board was not giving due consideration to the strategic alternatives available in the current industry and M&A [mergers and acquisitions] environment".

The shareholder said it believed 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".

IHG issued a rebuttal of Marcato's demands last year, saying that while it had met the firm twice and reviewed its analysis last autumn, its directors had "concluded that it remains in the best interests of all its shareholders to continue to pursue its current strategy for high quality growth and delivering strong operational and financial performance".

IHG's chief executive, Richard Solomons, has pleased shareholders with a series of substantial capital returns generated by the sale of flagship properties as it shifts its business model to hotel management rather than ownership.

In July, IHG sold the InterContinental in Hong Kong for almost $1bn, and said it would update investors on whether any of the proceeds would be returned to them alongside its annual results next February.

The group has also been accelerating its pipeline of new hotels, operating roughly 5% of the world's existing rooms but with more than twice that level of the global industry's slate of new rooms.

Despite its focus on organic growth, IHG did acquire Kimpton, the world's biggest independent boutique hotels business, for £275m late last year.

It has also been named as a possible suitor for the parent company of Fairmont Hotels, which has been put up for sale for about $3bn, although insiders said that IHG would not be interested in pursuing a deal at anything close to that price.

Starwood is due to reveal the outcome of a strategic review which may lead to a sale in the next few months.

An IHG spokeswoman declined to comment, while a spokesman for Marcato did not reply to a request for comment.