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The Bass Group just announced they have a 12.7% stake in Meristar Hotels & Resort (MMH). They have been buying blocks of stock over the past two weeks. This is hugely positive. Meristar Hotels & Resorts is a result of merger between Capsar Hotels and American Hospitality in August. The merger resulted in a paperclip structure, i.e. a REIT (MHX - Meristar Hospitality) and an operating company (MMH - Meristar Hotels & Resort). Both MHX and MMH trade on NYSE. Meristar Hotels & Resort is the largest independent hotel management company managing names such as Hitlon, Sheraton, Doubletree, Embassy Suites, Crowne Plaza. These are upper end full service hotels located in metropolitan areas. This is important because the barriers to entry in large cities is high and the room rates are less sensitive to the economy. MMH is pegged to earn 12 cents this year and analysts are looking for 20-24 cents next year. They are expected to grow by at least 40-50% over the next 2-3 years. Some think the stock could be $10 over the next few years. The management of the company is extremely experiened with seasoned real estate professionls who understand the real estate cycle. Management has a 8% stake in the company and has recently bought a significant amount of stock via a rights offering at $2.82. The purchase by Bass Group could mean they are interested in buying the management company outright or starting some type of business relationship. Some say the Bass Group might want them to manage LaQuinta Inns which is owned by Meditrust. The Bass Group recently took control of Meditrust. The other possibility is having Meristar manage some of the Bass's other properties that they own privately. In any case, the Bass Group is sophisticated and must see value here. Another 5% holder named Pequod filed two weeks ago concerning their large stake. This means over 25% of the stock is closely held already. It won't take much for this stock to appreciate as the company becomes more visible. | ||||||||||||||
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