The U.K.'s InterContinental Hotels Group plc on Tuesday broke with its habit of selling real asset and returning cash to shareholders to strike a $430 million deal to buy privately held Kimpton Hotels & Restaurants and create the world's largest boutique hotels business.
San Francisco-based Kimpton, like InterContinental, is an "asset-light" company, meaning it doesn't own much of its real estate. Founded in 1981 by Bill Kimpton, it operates 62 hotels, with 16 further hotels in the pipeline, as well as 71 bars and restaurants located at its hotels.
InterContinental CEO Richard Solomons defines "boutique" accommodation as properties with "individual characteristics and limited brand hallmarks" and noted that it is the fastest-growing segment of the hotels sector. Kimpton is already the largest player in the segment and its combination with InterContinental's Hotel Indigo and Even Hotels chains will create a larger No. 1.
Solomons described Kimpton as "clearly differentiated but not too edgy," noting that its core customers were 35- to 55-year-old business travelers. The chain offers extras such as yoga mats and is "100% pet friendly," Solomons said on a conference call.
"It is a great brand with enormous potential to grow both within the U.S. and globally," he said.
The agreement comes a month after activist investor Marcato Capital, also of San Francisco, launched a new bid to get shareholder backing for a shake-up at InterContinental by releasing a report compiled with adviser Houlihan Lokey Inc. that claimed a merger could boost the U.K. company's valuation by 100% or more.