By George! Global Gains
03/28/2003 12:00 am EST
“Hospitable: that's what you'd call the British company Six Continents (SXC NYSE). While not a household name in the US, many of the company's operations are quite familiar, including Holiday Inn and Intercontinental. Like others in the hotel business, times are tough for the company and its shareholders. However, unlike many of its US peers, Six Continents isn't as burdened by debt woes, giving it some staying power. The company's operations also include a vast collection of pubs, bars, and other retail outlets in and around the UK and Europe.
”Management has been sluggish to streamline the company's operations, causing the shares to simply plod along. Shareholders, while not too leased, have been placated by the generous dividend yield, but this pleasant--if not profitable--existence has been shaken up by a burgeoning bidding war for the company by competing hospitality and hotel businesses such as Hilton as well as a corporate raider of sorts, Hugh Osmond. The company is responding with a breakup and spin-off of its operating units, voting this week to split off the pubs business unit while keeping the hotels. One way or another, this will undoubtedly lead to a takeover.
”The shares have moved a bit higher, but they're still cheap, especially considering that they're priced at a discount to book and a mere fraction above trailing sales. And while you're waiting around for a nice premium bid, the company will pay a nice fat dividend that currently exceeds 5% annually. Buy Six Continents up to an initial target of $10.10.”