Icahn bids for control of Fairmont - East Valley Tribune: Business

Icahn bids for control of Fairmont

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Posted: Saturday, December 3, 2005 5:52 am | Updated: 8:57 am, Fri Oct 7, 2011.

The Fairmont Scottsdale Princess Resort is part of a billion dollar spat that could result in takeover giant and hotel-casino owner Carl Icahn at the helm.

At least temporarily.

Icahn said he plans to seize control of Fairmont Hotels & Resorts, fix it and sell it.

Icahn, who previously has said the Canadian-based luxury lodging company should sell itself to a larger competitor, said Friday he will launch a $1.19 billion cash offer to obtain a controlling 51 percent stake.

Icahn, whose investment groups own 9.3 percent of the Canadian-based hotel chain, said he will offer to buy up to 29.6 million shares of Fairmont for $40 per share.

Shares of Fairmont rose $1.81, or 4.7 percent, to $40.60 Friday, topping their previous 52-week high of $39.70. Since the year began, the Toronto company’s stock had risen 18 percent.

Icahn, who has warned Fairmont that it needs to boost its share price, said the company and its shareholders would benefit from a sale to a larger hotel operator, ‘‘that is able to more effectively take advantage of economies of scale.’’ If Fairmont is willing to pursue this path, Icahn said he would be willing to enter talks with the company and accommodate a sale process.

Fairmont CEO William Fatt, in a statement, said the company’s board, ‘‘would strongly oppose any partial bid which is coercive by its very nature and does not treat all shareholders fairly and equally.’’

Fatt said Icahn’s offer would let him nab a hefty stake in the company, ‘‘without paying a takeover premium to all shareholders’’ and is ‘‘unacceptable.’’

Fairmont will issue a formal recommendation to shareholders on Icahn’s offer if and when he starts the actual takeover, the company said.

The impact of a possible Icahn takeover or a Fairmont sale on the sprawling 651-room Scottsdale property is unknown.

"There is nothing to say at this point. It’s early to speculate," Fairmont Scottsdale spokeswoman Jennifer Franklin said Friday. "Our No. 1 concern is taking care of our guests."

The upscale resort just completed a $5 million, multiyear upgrade of its bedding and decor, she said.

Icahn couldn’t be reached for comment Friday.

Toronto-based Fairmont has more than 80 properties, mostly in North America. The original Fairmont Hotel opened 1907 in San Francisco. The company was bought in 1999 by Canadian Pacific Hotels & Resorts, which took the Fairmont name.

A well-known activist investor, Icahn earlier this week announced that he would launch a proxy fight with media giant Time Warner Inc. to take control of its board. Icahn has been pressuring Time Warner to spin off its entire cable TV division and buy back more company stock from investors.

Icahn made his interest in Fairmont official in November, when he disclosed that he had acquired a 9.3 percent stake in the upscale chain for about $185.1 million. Icahn said in a securities filing at the time that Fairmont’s shares were undervalued, and that the company should pursue ‘‘strategic alternatives’’ for boosting its stock price.

Such options for Fairmont included a possible sale of some or all the company, and returning the profits to shareholders via a dividend or stock buybacks. Icahn also said at the time that his group aimed to meet with Fairmont’s executives to discuss the issue.

CIBC analyst David Katz said in an interview that Fairmont has been seen as a potential takeover target for the last six to 12 months, ‘‘because their performance has been somewhat tepid in a very good environment.’’

Katz said if Fairmont were to put itself up for sale, the company would likely see teams of potential acquirers, rather than one buyer, emerge.

Merrill Lynch analyst David Anders said in a client note in November that Fairmont’s long-term strategy is to primarily become a hotel management company, rather than both a hotel property owner and manager, but Fairmont hasn’t yet announced any property sales.

‘‘We find the lack of hotel sales slightly disappointing given the strength of the market for assets and liquidity possessed by private equity firms and REITs,’’ Anders said in the note.

Rivals such as Starwood Hotels & Resorts Worldwide and Marriott International Inc. have already been shifting toward such a structure. Starwood, for instance, announced in November that it would sell 38 hotels to Host Marriott Corp., the nation’s largest hotel real estate investment trust, for $3.4 billion.

Fairmont CEO Fatt, in his statement Friday, said ‘‘Fairmont is a company with tremendous potential.’’

‘‘There is ongoing growth in the value of our luxury brand, which is demonstrated through our proven ability to expand our collection of world-class hotels and resorts,’’ he said. ‘‘We have previously stated publicly that Fairmont’s board has been actively engaged in a process of reviewing prudent options for enhancing value for our shareholders.’’

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