Hotel shares in Europe join the party

DUBLIN: Shares of European hotel companies rose after Hilton Hotels agreed to be taken private by Blackstone Group for $20 billion, fueling speculation other hoteliers may be targeted. Stock in InterContinental Hotels Group, the owner of the Holiday Inn chain, climbed as much as 6.4% in London, while shares in Accor, Europe’s largest hotel company, gained as much as 8.1% in Paris.

Whitbread, owner of Premier Travel Inn budget lodges, advanced as much as 7%, while Millennium & Copthorne Hotels, Sol Melia and NH Hoteles also rose. Blackstone, the owner of the La Quinta chain, is among private equity firms that are buying hotels to profit from their cash flow and real estate holdings. InterContinental stock has risen 36% in the past year, boosted by bid speculation. “This is a game-changing deal for the hotel sector and will re-ignite bid speculation for other hotel companies,” Numis Securities analysts wrote in a note published Wednesday. Deals that seemed ‘unthinkable’ a year ago are 'now happening apace', the analysts wrote.

Shares of Windsor, England-based InterContinental were up 66 pence, or 5.3%, to 1,324 pence as of 10:24 am in London, valuing the company at 4 billion $8 billion).

Barry Sternlicht's Starwood Capital and the billionaire Barclay brothers have been cited in media reports as potential suitors for InterContinental. Ellerman, a company controlled by the Barclays, last month raised its stake to 10%.

The value of the Hilton transaction suggests InterContinental could potentially be bought out for almost 1,700 pence a share, according to James Ainley, an analyst at JPMorgan Chase in London. Ainley has an 'overweight' rating on the stock.

Shares in Accor climbed 4.39 euros, or 6.8%, to 69.29 euros as of 11:24 am in Paris, raising the hotelier's market value to 15.6 billion euros ($21.4 billion). Colony Capital said after the close of trading Tuesday it would raise its holding in the Paris-based company to more than 10% by converting bonds worth 500 million euros into stock.

"Accor shares are being lifted by the takeover of Hilton, which is helping the whole industry," said Clemence Bounaix, an analyst at Richelieu Finance in Paris. "The real-estate assets is the main thing that interests private equity."

Credit-default swaps on 10 million euros of debt sold by Accor rose 2,500 euros to 36,500 euros, according to CMA Datavision in London. The contracts are based on bonds and loans and an increase indicates worsening perceptions of credit quality.

Whitbread stock gained 74 pence, or 4.2%, to 1,827 pence in London, the steepest climb since March 21. That valued the Luton, England-based company at about £3.6 billion. Blackstone's takeover of Hilton shows that "a hot market for hotel deals has not diminished, and apparently high multiples are still being paid," Kate Pettem, a London-based analyst at Bridgewell Securities, said Wednesday in an e-mailed note. She repeated her 'overweight' rating on Whitbread shares. Shares of Millennium & Copthorne, the UK operator of the Biltmore in Los Angeles, advanced as much as 7.4% and were up 3.9% at 677.5 pence as of 10:24 a.m.

In Madrid, stock in Sol Melia, the world's largest resort operator, rose 4.8% to 17.42 euros as of 11:24 am local time, while shares of NH Hoteles, Spain's largest chain of business hotels, climbed 3.5 % to 16.62 euros.