Fairmont Rebuffs $1.9 billion Bid, Icahn Plans Next Move
NEW YORK, NY, December 28, 2005. Rebuffed by Fairmont Hotels & Resorts' board of directors in his bid to acquire a controling interest in the Toronto-based hotel chain, Carl Icahn may be willing to raise the value of his offer to buy all of Fairmont, according to press reports. In return for a higher offer, Icahn would want the right to conduct a due diligence review of the company's books.
The company's board has rebuffed Icahn's $1.19 billion for 51% of the company's shares, describing the offer as inadequate. The board urged Fairmont shareholders to reject the bid. Icahn already has a 9.3% stake.
Icahn's investment arm, Icahn Management LP, said it continues to believe Fairmont is undervalued and may raise its offer significantly based on the due diligence review. Icahn outlined his strategy in a letter sent to Fairmont and made public in an SEC filing.
Fairmont owns and operates more than 80 luxury hotels around the world. The board has established a special committee to explore alternatives to Icahn's offer. Fairmont currently has a market capitalization of $2.9 billion.
Fairmont said it had signed confidentiality and standstill agreements with other potential bidders and that preliminary talks were underway. Fairmont declined to disclose the identity of these parties. According to industry sources, two major hotel chains and a Wall Street invstment firm have shown interest.
Icahn's group said in its letter on Tuesday that it would be willing to enter into a confidentiality and standstill agreement that would limit its ability to purchase shares other than in connection with its existing offer.
One possible white knight is Prince Alwaleed bin Talal, whose Kingdom Hotel Investments already owns approximately 5% of Fairmont's shares.
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