November 11, 2014
Dear Fellow IHG Shareholders,
As you know, Marcato Capital Management LP (“Marcato”) is one of the largest shareholders in
Intercontinental Hotels Group plc (“IHG” or the “Company”), owning approximately 4% of shares
outstanding. We believe that IHG is an attractive business with a unique, limited-time opportunity to
create significant long-term shareholder value.
Following media reports of a £6 billion unsolicited offer that was quickly rebuffed by the Board of
Directors of IHG (the “Board”), we grew concerned that the Board was not giving due consideration to
the strategic alternatives available in the current industry and M&A environment. We hoped to engage in
a constructive dialogue with the Board and IHG’s management regarding a process to explore potential
options for enhancing long-term shareholder value. However, IHG has dismissed our suggestions and it
appears they have neither solicited offers nor performed the rigorous analysis necessary to evaluate
potential options to achieve this goal.
Given our lack of confidence in the Board’s conduct, Marcato retained Houlihan Lokey in August 2014
as its financial advisor to evaluate opportunities for enhancing long-term shareholder value at IHG,
including capital structure and/or capital allocation improvements and strategic combinations. Houlihan
Lokey has conducted extensive research and a comprehensive strategic review.
After receipt of this evaluation, Marcato concluded that on a standalone basis, IHG will not be able to
provide shareholder value comparable to what could be achieved through a combination with another
major hotel operator. In fact, based on reasonable assumptions, Marcato found that an equity
combination could deliver a premium upwards of 100% over IHG’s current share price, creating a
powerful and diversified hotel management company and further enhancing IHG’s value by:
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Increasing growth opportunities through expanding the scope and scale of the business;
Generating substantial business and financial synergies; and
Producing long-term pro forma earnings accretion and share price appreciation.
Most importantly, in the event of a transaction, IHG’s shareholders would likely maintain meaningful
ownership of any combined entity, therefore enabling us to participate in the long-term upside of the
larger, stronger company.
To ensure the Board and IHG’s management are acting responsibly and in the interests of all IHG
shareholders, we feel compelled to share the analysis*. The presentation is available at
www.IHGvaluecreation.com.
As the analysis highlights, this is a unique and ideal time for IHG to consider strategic alternatives – the
hospitality industry and M&A environment are both strong, interest rates are at record-lows, there are
substantial revenue and expense synergy opportunities, and we believe there is likely to be interest from
several potential strategic partners.
It is important to note that we believe it would be highly unlikely for another major industry player to
commit the time and resources necessary to put forth a combination proposal without a sense that it will
be seriously considered and evaluated by IHG.
Ultimately, IHG’s Board has an ongoing duty to consider whether the Company’s current business plan is
likely to create as much or more value than can be created through a combination with another major
hotel operator. Our analysis demonstrates that a combination could result in immediate, significant, and
abiding shareholder value -- much more than is likely to be created under IHG’s current business plan.
The bottom line: The opportunities created by today’s favorable market conditions may not be available
in the future. Therefore, we urge the Board to immediately embark on a full review of strategic
alternatives, including engaging with synergistic partners, before this window of opportunity closes.
Sincerely,
Richard T. McGuire
Managing Partner
Marcato Capital Management LP
*For regulatory reasons this presentation is only available to certain categories of IHG shareholders.
Houlihan Lokey is acting for Marcato Capital Management LP and no one else in connection with the
matters referred to above and will not be responsible to anyone other than Marcato Capital Management
LP for providing protections afforded to clients of Houlihan Lokey or for providing advice in relation
thereto.
The information, beliefs and/or opinions in this document, and the letter and presentation to which it
refers, are provided for information only. Nothing in those documents is, or should be construed as,
investment advice or as a recommendation, invitation or inducement to engage in any investment activity,
and should not be used as the basis for any investment decision. Any information, beliefs, and/or
opinions provided in those documents are given as of the date of each document respectively, and are
subject to change without notice. Marcato Capital Management LP does not accept responsibility or
liability (in the absence of fraud) for any errors in or omissions from the information, beliefs, and/or
opinions included in those documents.