Shares jump on prospect of Fairmont asset sale
Icahn may push company out of hotel ownership Would boost ‘undervalued’ stock, analyst says ICONIC PIECES OF CANADA’S HERITAGE COULD BE UP FOR AUCTION
With his newly acquired 9.3 per cent stake in Toronto-based Fairmont Hotels & Resorts Inc., billionaire investor Carl Icahn could push the company out of hotel ownership and deeper into the property management side of the business.
It’s a direction in which the company is already headed and amove that would unlock value in Fairmont stock, Michael Smith, a real estate analyst with National Bank Financial in Toronto, said yesterday.
“ Carl Icahn ( is) basically going to try to force the company to sell the properties or he’s going to try to force ( the sale of) the entire company,” he said.
“( Fairmont) could just do what they planned on doing anyway, just sell the properties and just do it quicker than planned.”
Fairmont, which through its 24 per cent interest in Legacy Hotels REIT owns a stake in the downtown Fairmont Royal York, would not be the first Torontobased major hotel chain to thin its roster of properties.
Four Seasons started shedding hotel assets in 1993, selling the Four Seasons Toronto in 1996, a year the company expected to generate more than 85 per cent of its operating earnings from hotel management.
Investors reacted favourably yesterday, sending Fairmont’s stock up $ 1.10, or 2.6 per cent, to $43 in Toronto trading after the shares had hit $ 44.30 earlier in the day.
Before yesterday, they were up less than 1 per cent this year.
Focusing more on property management — which has higher profit margins, is less volatile and far less capital- intensive — should be alluring for Fairmont,
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