InterContinental Hotels Group is again in the headlines as a takeover target with The Guardian in London reporting that analyst Berenberg suggests a £7 billion (US$11 billion) offer could be enough to secure board agreement.
Berenberg, which has issued a buy note with a £27.50 (US$42.93) price target, says the company could merge with or take over Hyatt Hotels Corp., but is more likely to be pursued with Starwood or Hilton the most obvious acquirers.
IHG has been selling its large trophy hotels, including the Paris Le-Grand, and recently announced the purchase of Kimpton hotels, but Berenberg suggests it will take a larger deal for IHG to maintain its independence.
In its analysis of IHG, Berenberg concluded:
“If the company is to be prey and the transaction is to involve the issue of equity to IHG shareholders, we believe that a link with Starwood or Hilton would make the most sense. This reflects the fact that there is the potential for a re-rating upwards of shares received by IHG shareholders given the difference between the implied adjusted EV/EBITDA between IHG and Starwood and Hilton. We would expect that an offer of between £29 and £30 per share would secure IHG, which implies that IHG shareholders would receive 70% of the synergies from a tie-up with one of the biggest three players.”