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The Demerger of Six Continents PLC (B):
By Siriwan Chutikamoltham & Yvonne Chong |
| Publisher Ref No: | ABCC-2010-007 | Pub/Rev Date: | 2010 |
| Industry: | Hospitality | Case Length: | 21 pages |
| Teaching Note Ref: | ABCC-2010-007(TN) | Teaching Note: | 18 pages |
| Organisation: | Six Continents PLC | Period Covered: | 2002 - 2008 |
| Country: | United Kingdom | Level: | Undergraduate/ Postgraduate |
| Additional: | Teaching note available |
| Publisher: | The Asian Business Case Centre, Nanyang Technological University |
Abstract
InterContinental Hotels Group (IHG) and Mitchells & Butlers (MAB) were part of a hospitality conglomerate known as Six Continents PLC. The Group had undergone a demerger in 2003 to create two separately listed entities that could better pursue their own developmental strategies.
In 2007, IHG was the world's largest hotel group and its growth had been achieved primarily by managing and franchising hotels under the Group's brands including Holiday Inn and Crowne Plaza. It operated an asset light business model and owned only 18 of its 3,949 hotels, which significantly reduced capital requirements and enabled return of funds to shareholders.
MAB's approach was to own and develop pubs and restaurants mainly in the UK. Its average weekly sales per outlet grew from £14,100 in 2003 to £18,500 in 2007, more than three times the national average. As industry consolidation and changing market trends dramatically altered the competitive landscape in UK's pub sector, the pub owner further evolved into one of Europe's most successful foodservice operators.
This case deals with the outcomes of the demerger, with a focus on the shareholder value that 6C's demerger might have created or destroyed with market information and financial data of pre and post-demerger periods for comparison.
Instructors may wish to follow this case with "The Demerger of Six Continents PLC (A)". Case A examines the business and financial strategic issues of a demerger, influences of the external environment on an organization, and provides opportunity for debate on the benefits and costs of a divestiture business strategy.
Issues:
M&As; Financial analysis and outcomes of a demerger; Shareholder value creation; Business strategy
About the Authors
