IHG ignores reports IHG and Starwood in merger deal talks

Did they, or didn’t they? Reports claim IHG and Starwood had talks about a merger, but IHG denies it ever happened.

The stock market responded favourably after the Financial Times reported InterContinental Hotels Group and Starwood Hotels & Resorts held “early stage talks” about a possible union, after which IHG firmly denied any talks were held with a “view to combine the businesses”.

“We never comment on speculation. There’s been speculation around us, around the industry for many years and we never speculate on it,” IHG chief executive, Richard Solomons told UK’s Telegraph.

After the FT reported news of a possible merger between the two hotel giants, IHG shares jumped in London trading with peak gains spiking to 5.5% before closing 3.1% higher. Starwood shares also rose in early New York trading.

The Financial Times reported the “informal talks were very tentative” between the two hotel groups, citing two people familiar with the discussions. A merger between the two would create the world’s largest hotelier and the third largest by market value behind Hilton and Marriott. Combined, IHG and Starwood would have more than one million rooms in 100 countries.

However, the FT said its sources cautioned that “Starwood may choose another suitor or pursue another strategy”, and could be having parallel talks with other interested groups.

One of the sources told the paper US hotel group Wyndham was another possible candidate. According to the report, people familiar with the matter previously claimed Wyndham informally approached UK-based IHG about a potential £6 billion takeover last year.

IHG is said to be working with advisers including Bank of America Merrill Lynch on the tentative talks with Starwood, FT cited a person close to situation said, the report Thursday stated.

After the news broke, IHG said in a statement: “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.”

IHG posted a 21.5% increase in first-half pre-tax profits to US$458m.

“There is a lot of noise around consolidation. If you look back a few years it was real; now it is effectively organic,” Solomons said, FT reports.

“We have had extensive organic consolidation: we signed more deals in the first half than any time since 2008, we are building new brands and buying up little brands like Kimpton.”

IHG earlier this month sold its iconic InterContinental Hong Kong hotel for US$938m, and at the time Solomons remained tight lipped about what the hotel group would do with the funds.

“We don’t say what we are going to do with it until we have got the money. So on February 16, when we know we have got it, we will say. But you know our track record – we have returned US$10bn to shareholders,” he said, FT reports.

Speculation was rife that Starwood was considering to buy IHG in Travel Weekly in May, after Starwood executives appointed Lazard and said they were exploring a “full range of strategic and financial alternatives” with “no options off the table”; at the time causing IHG shares to soar to record highs.

Image: Heathcliff O’Malley Telegraph.co.uk

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hotel Hotelier ihg kimpton merger Richard Solomons starwood