HOSPITALITY INDUSTRY I The manager last year raised $1.6 billion US for two hedge funds
GARRY MARR
Sun
TORONTO — Fairmont Hotels & Resorts Inc. chief executive Bill Fatt called Carl Icahn one of the “least attractive aspects of American capitalism,” after the billionaire hedge fund manager said Friday he will launch a hostile offer for 51 per cent of the company.
Icahn, through affiliated companies he controls, will offer $40 US per share to bring his holdings to 29.6 million shares — or 51 per cent — of Toronto-based Fairmont. The offer is conditional on his acquiring 18.1 million shares of the company.
The move comes after Icahn revealed last month, in a regulatory filing, that he had already acquired 9.3 per cent of Fairmont shares.
“The offerers believe that Fairmont and its shareholders would benefit if the company were acquired in its totality by a larger hotel operator that is able to more effectively take advantage of economies of scale,” said the release from Icahn.
Icahn and Fatt have met once and had several telephone discussions about how to increase the company’s share price, but, in the wake of Friday’s announcement, those talks clearly have not produced a compromise. Icahn wants Fairmont to sell off its properties, with hotel values now soaring to new heights.
The 69-year-old Icahn raised $1.6 billion US for two hedge funds last year with the aim of investing the cash in underperforming companies. He has already targeted Time Warner Inc. and Blockbuster Inc.
“He’s trying to unlock value, and that’s a good thing,” said Joe Fath, an analyst at Baltimorebased T. Rowe Price Group Inc. “This comes from his frustration that management hasn’t been moving fast enough, and it’s a hot seller’s market.”
In an interview, Fatt said the move by Icahn for a 51-per-cent stake was coercive because it is only a partial takeover offer. “He’s trying to stir things up. Icahn personifies one of the least attractive aspects of American capitalism through this kind of coercive activity, but it is the system we operate in,” said Fatt.
The chief executive of Fairmont said the board will strongly oppose any partial bid for the company because it would give up control without any takeover premium. “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,” said Fatt.
Fairmont would not say whether it is considering other suitors in an effort to stave off Icahn, but one player could be Prince al-Waleed bin Talal bin Abdulaziz al-Saud, who owns five per cent of Fairmont and is friendly with the company’s board.
“We are a partner with him in a whole bunch of different ways, as well as him being a shareholder. We talk with him frequently,” said Fatt, adding he had not talked with the prince about the latest offer.
Michael Smith, an analyst with National Bank Financial, said a bid by Middle East investors, led by the prince, is a strong possibility.
“I think there are two possible options. One is [Icahn] gets control of 51 per cent and forces the company to sell all of its assets,” said Smith. “The second outcome is someone will bid $42 US to $45 for the company, probably closer to the higher amount. I would expect that would make [Icahn] very happy.”
