A potential merger with or acquisition of Strategic Hotels & Resorts, Inc. (NYSE: BEE) is not really new news. That being said, the company did announce on Monday that it is now formally exploring possible strategic alternatives for the company. Strategic Hotels did note that this includes a potential sale of the company, and it also announced that it has hired J.P. Morgan as financial advisor in this process.
24/7 Wall St. has addressed this potential sale or merger scenario before on Strategic Hotels & Resorts. The question is whether or not anything has really changed. If nothing has changed very much, it might do a lot to explain the less than stellar reaction the market gave it. Strategic Hotels & Resorts shares were up by only 1.6% at $14.15 late on Monday. That doesn’t sound like that strong of a vote of confidence.
Strategic Hotels & Resorts also warned, as one would expect, that there are no assurances that the company will enter into any transaction at this time nor in the future. The company further said that it does not intend to make additional public announcements of its alternatives prior to the completion of this exploration.
24/7 Wall St. went back to a report in July that Strategic Hotels & Resorts was interested in being acquired. A Credit Suisse report went into more detail, but its official price target was $15.00. Shares had been at $13.50 prior to that, and they were at $14.15 on last look on Monday.
Credit Suisse’s Ian Weissman said that an in-depth asset value analysis implies that a strategic buyer from private equity or sovereign wealth would likely pay at least $16.50 per share. Again, there was a much more detailed review back then. Still, a $16.50 top-end buyout price might sound fine against a $13.50 price but less exciting versus $14.15.
Any would-be buyer would also have to deal with the $1.46 billion in current debt that is already on the books. Still, its land and properties have a carry value of $3.276 billion in the balance sheet. Strategic Hotels has a total equity value of almost $1.6 billion, and net tangible assets of $1.46 billion.
Strategic Hotels & Resorts was last seen up 1.6% at $14.15, with a consensus price target of $14.89 and a 52-week range of $11.01 to $14.43. The current market cap is $4.9 billion.
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