Rumors are swirling that IHG (InterContinental Hotels Group) is about to buy Fairmont Raffles from Qatar-based Katara Hospitality and Saudi Arabia-based Kingdom Holdings for £1.9bn (US$2.95 billion), beating out the likes of Accor and Wyndham to the finish line.
The Sunday Times in London first reported Sunday that a deal could be announced “within weeks,” which would give IHG a stronger position in the luxury segment, taking over properties with big names such as the Savoy in London and Raffles in Singapore. The move also would help solidify IHG’s move into management, adding to its asset-light portfolio mix.
Morgan Stanley analysts responded positively to the deal speculation, saying it would be a good fit to fill in luxury brands, despite the steep price tag. Morgan Stanley’s Jamie Rollo told The Sunday Times that with a possible US$1.5 billion buyback by InterContinental, the purchase price for Fairmont Raffles would make it hard to boost earnings per share in a material way if the share repurchase went ahead.
Morgan Stanley further told The Sunday Times, “Unencumbered luxury hotel brands don’t come around that often, and the conundrum InterContinental likely faces is having to justify a multiple potentially double that on which its shares trade, and thus forfeit the more immediate and relatively safer upside from a large share buyback.”
Neither party has commented on the rumor, but IHG has yet to come out with a statement denying the story as it did when there were rumors about an IHG-Starwood deal weeks ago.