Will hotel firms climb into bed?

FIVE-star talk of a pending £20bnplus luxury international hotels merger did the rounds yesterday.

Shares of US group Starwood Hotel & Resorts Worldwide, which owns Le Meridien, St Regis and Westin brands, improved to $84.30 on the Street of Dreams as speculation increased that it would soon be climbing into bed with Holiday Inn and Crowne Plaza group Intercontinental, 11p better at 2700p, in a ‘friendly’ deal which would value the US stock at around $110 a share.

Starwood Hotels in April hired investment bank Lazard to ‘explore a full range of strategic and finance alternatives to increase shareholder value’. Analysts said at the time it could lead to the company putting itself up for sale or to merge with a rival.

Intercontinental has always been seen as the likeliest merger partner. US hedge fund and shareholder Marcato Capital Management implored the IHG board to consider a merger with a rival, but up until now its suggestion has fallen on deaf ears.

Intercontinental’s shares jumped 80p recently following the £604m sale of its luxury flagship hotel in Hong Kong to a consortium. The £450m profit sparked speculation of a bumper cash or special dividend return to shareholders. City sources now suggest the sale was part of a plan to help fund a merger or audacious bid for the bigger Starwood Hotel & Resorts Group.

Starwood could yet attract other international interest, either from the Qataris, the Hilton Hotels group or the Chinese.

Just when dealers thought the Greece imbroglio was over, along came the International Monetary Fund to warn that Greece might need a 30-year debt moratorium and maybe longer-term fiscal transfers, given what it sees as Greece’s ‘dramatic deterioration’ in debt sustainability. As dealers kept all digits crossed that the Greek parliament would agree to the new austerity conditions agreed with the EU, the Footsie trod water and closed up just 4.43 points at 6753.75.

Wall Street traded 20 points higher early on ahead of Federal Reserve boss Janet Yellen’s testimony to the House Financial Services Committee at which it was hoped she would give some clues on the timing of the Fed’s first interest rate hike in more than nine years. Bank of America Merrill Lynch also helped sentiment by reporting a sharp 132pc jump in second-quarter profits to £3.4bn.

Wickes DIY group Travis Perkins rose 60p to 2224p after Berenberg lifted its target price to £25 from £20 while vague takeover chatter lifted RSA Insurance 7.5p to 425.3p.

Mobile phone giant Vodafone slipped 2.2p lower to 235.7p after Goldman Sachs downgraded to neutral from buy. The broker believes that after recent outperformance on the back of deal talks with Liberty Global, the group now faces foreign exchange headwinds, regulatory uncertainty and potentially higher spectrum costs.

Goldman Sachs also pulled the plug on BP, 2.05p cheaper at 427.1p. The US broker is convinced that cash generation will not be enough to cover the dividend. Its 12-month price target is 370p.

Mainframe computer specialist Micro Focus plummeted 96p to 1338p after Wizard Parent banked £270m from selling 20m shares at 1350p, reducing its stake to 66.6m shares, or 30.7pc. The placing was undertaken by Morgan Stanley and UBS, and joint bookrunners were Merrill Lynch and Numis.

Wizard Parent, which is owned by Francisco Partners, Golden Gate Capital, Thoma Bravo and Elliott Management, came to own about 40pc of Micro Focus when it acquired Attachmate for £1.2bn in September 2014.

Plus500 edged up 2.5p to 388.25p ahead of today’s shareholder vote on Playtech’s (8p dearer at 881.5p) £4-a- share cash offer. Crispin Odey’s fund, which owns 20pc, has rejected the offer as it ‘ undervalues’ the group. Plus500 insiders apparently own 35.6pc of the equity and obviously plan to back the offer.

Awaiting further takeover developments, online gaming group Bwin.Party Digital Entertainment held rock steady at 103.3p. GVC is said to be willing to offer £900m or 110p per share. 888 Holdings, 4p up at 162p, is also waiting in the wings.

NAHL, the UK consumer marketing business focused on the UK legal services market, rose 18p to 342p after a first-half trading update. National Accident Helpline, its personal injury business, has performed in line with expectations. Broker Investec lifted its target price to 375p from 350p.

Intermediate Capital rose 15.5p to 578.5p after strong fundraising in the quarter to the end of June saw a sharp increase in assets under management. It raised £2.8bn of new third-party money in the three months, resulting in a 12pc rise year-on-year in assets under management to £20.2bn. ALKANE Energy, which operates midsized ‘gas-to-power’ electricity plants to the grid, jumped 2.25p or 1pc to 24.5p. Buyers switched on following National Grid saying that the risk of blackouts this winter has increased compared with a year ago. It said the closure of some power stations will have left spare capacity on the system at just 1.2pc, which is the worst in a decade.