Credit Suisse sees bid for M&A target IHG as unlikely

24th Jun 2014 09:58

Credit Suisse has played down the likelihood of a Wyndham Worldwide bid for Crowne Plaza and Holiday Inn owner InterContinental Hotel Group (IHG), saying that recent speculation about a possible deal is "weak".IHG shares rose strongly on Monday after Sky News revealed at the weekend that Wyndham, which owns the Ramada hotel chain, was behind a £6bn takeover offer for the hotels group earlier in the year.While this bid was rejected and no longer live, investors were hoping that Wyndham could soon return to the table with another offer.Credit Suisse explains that the primary rationale for consolidation in the hotels sector is normally the removal of duplicate cost."However, given Wyndham generates only 23% of [operating profits] from lodging with 77% vacation rental/timeshare, we would see the specific synergy opportunity from a Wyndham and IHG combination as modest," it said.The bank has raised its target price for IHG slightly from 1,870p to 1,900p, saying that the trading outlook for the company is "strong". However, an 'underperform' recommendation has been maintained, given that the valuation - stock is trading at 23 times estimated earnings for 2015 - "looks full".IHG's shares were down 0.1% at 2,366p by 09:40..BC