Analysts say Fairmont deal good for IHG

Intercontinental Hotels Group (IHG) is reportedly eyeing a bid for luxury hotel chain Fairmont, which Morgan Stanley investors say would be a good move for the group. 

It was reported in June that owners of FRHI Hotels & Resorts, which include a Qatari government fund (Katara Hospitality) and Saudi Prince Alwaleed bin Talal’s Kingdom Holding Company, are looking to sell the luxury operator.

Yesterday, Morgan Stanley analyst told UK newspaper The Guardian: "Press reports (Sunday Times) suggest that InterContinental is closing in on a deal to buy Fairmont Raffles for £1.9bn. Sources suggest InterContinental has beaten rivals including Wyndham and Accor, and is likely to seal the deal 'within weeks'.

"Neither party has commented, but we note that InterContinental has not put out a statement denying the rumour, as it did after the Starwood takeover rumour (though the company said it was required by the authorities to put out a statement that time).

Deutsche Bank and Morgan Stanley were hired to market the Toronto-based company, whose brands comprise Fairmont, Raffles and Swissotel.

Morgan Stanley told The Guardian that such a deal would be good for IHG, as the group is weaker in the luxury market. 

FRHI operates 116 hotels with nearly 44,000 rooms in 34 countries. The list includes some historic luxury properties like New York’s Plaza Hotel, the Peace Hotel in Shanghai and the Savoy in London.

One hotel executive estimated that FRHI could fetch up to $3 billion for the sale of the company.

IHG had been in discussions with Starwood Hotels over a possible multibillion-dollar merger, according to the report the Sunday Times, but regulatory issues meant “talks never got off the ground”, a senior City source said.

IHG, which owns the Holiday Inn and Crowne Plaza brands, is said to be looking at investment in other hotel groups, including FRHI Hotels & Resorts and Swiss-based hotel management firm Mövenpick. A decision on whether to make a bid for either group has not yet been made, with Asian sovereign wealth funds also said to be interested.