Fairmont would oppose Icahn bid for 51% stake
The head of Fairmont Hotels & Resorts said its board would resist a bid by affiliates of financier Carl Icahn to gain a controlling stake in the high-end hotelier.
Early Friday, Icahn Partners LP and Icahn Partners Master Fund LP, announced they intend to start a tender offer to buy up to 29.65 million Fairmont (FHR) shares for $40 each, a slight premium to the stock's Thursday close of $38.79, up 12 cents for the session.
The groups currently own just over 9% of Fairmont; the additional shares would raise their interest to 51% .
Shares of Fairmont were up as much as 6% in morning action, pooping as high as $41.50.
In a written response, Fairmont CEO William Fatt said the company board "would strongly oppose any partial bid which is coercive by its very nature and does not treat all shareholders fairly and equally."
He noted that the tender offer, if successful, would give Icahn control of the company without paying a takeover premium to all of its holders, adding that "this proposed bid apparently will not comply with our shareholder rights plan."
Icahn's affiliates said the offer is conditioned on at least 18.1 million shares being properly tendered and not withdrawn.
This move comes after the groups acquired a stake of 9.3% in Fairmont's outstanding stock on Nov. 7. They noted that the $40 price tag represents a premium of 24.2% to the average closing price of the stock in the 60 days prior to the Nov. 7 transaction.
Icahn's affiliates said they believe that Fairmont and its shareholders would benefit if the company were acquired outright by a larger hotel operator that they feel would be "able to more effectively take advantage of economies of scale."
The groups expressed a willingness to enter talks with Fairmont to extend the length of the tender offer in order to accommodate a sale process if the company is interested.
Icahn's offer represents a multiple "above its lodging owner peers," wrote Joe Greff of Bear Stearns in a note to investors Friday.
"At these levels, we believe the Icahn offer represents more than fair value and do not see any of the large publicly traded hotel operators paying a higher multiple for [the company]," he added.
While Greff kept a peer perform rating on Fairmont stock, he "would use today's strength in [it] as an opportunity to rotate out....and into lodging stocks with more upside (and certainly not takeover premium built in)," including Hilton (HLT) , Starwood (HOT) and Marriott (MAR) .
About the Authors:
Michael Baron is a reporter for MarketWatch in New York.; William Spain is a MarketWatch staff writer in Chicago.