US hedge fund latest to line up tax inversion move

by Calum Fuller

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05 Aug 2014

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Intercontinental Hotels

A US HEDGE FUND has become the latest in a string of companies seeking to acquire a UK rival in order to set up a foreign tax centre.

The tactic, known as inversion, is primarily motivated by the disparity between the US's high 35% corporate rate and the UK's imminent 20% rate, brought in by the coalition to attract additional business to the UK. The current rate is 21%.

It comes less than three months after the collapse of Pfizer's failed takeover of AstraZeneca and Canadian pharma company Abbvie's acquisition Shire, also at least in part motivated by tax.

The latest target is the Intercontinental Hotel Group, which finds itself in hedge fund Marcato Capital's crosshairs, City AM reports.

The San Francisco-based fund already owns a 3.8% stake in the group and has retained investment bank Houlihan Lokey "to conduct a full strategic review for enhancing shareholder value" at the hotel group.

Marcato became a serious option when it emerged in May that the Holiday Inn and Crowne Plaza owner had declined a £6bn bid from a US suitor. Marcato, at that point, urged Intercontinental to entertain a deal.

But the advantage of the UK's favourable tax climate is now likely to see Marcato seek US investors to pursue a tax inversion deal.

"The review will focus on various alternatives including, but not limited to, improving capital structure and/or capital allocation and strategic transactions", the fund said in a statement. "Marcato believes current, favourable market conditions presently exist to significantly enhance IHG shareholder value, which may not be available in the future."

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