Elegant Hotels says takeover talks with Melia Hotels have ended

AIM-listed Elegant Hotels noted recent press speculation on Monday and confirmed that it had received an approach from Melia Hotels regarding a possible cash offer.

However, discussions with the group have now ended and Melia does not plan to make a bid.

In an update back in October, Elegant said trading since the interim results in June had remained in line with market expectations, with bookings ahead of the same period last year. It also confirmed it was on track to reopen the 4-start Treasure Beach hotel in Barbados at the start of the peak tourist season.

Canaccord Genuity said: "We view the Melia move as opportunistic but it does serve to highlight the large valuation gap between the share price and NAV of the company. Elegant's management confidence in rebuffing the offer also suggests that it has a credible plan to realise. We retain our 110p share price target and reiterate our 'buy' recommendation."

The brokerage added: "We believe Elegant Hotels needs to refinance its debt where it can, cut the dividend to a more sensible level and get back on the acquisition trail. It can be difficult for a company to cut its dividend because of how this action can be interpreted, but an 8% yield suggests a cut has been factored in by the market. Indeed, a 'reboot' should act as a positive catalyst to close the gap to our target price."

At 0925 GMT, the shares were up 5.4% to 88p.