Colony Capital, Saudi Prince to Buy Fairmont Hotels & Resorts

Colony Capital, the Century City investment firm headed by real estate tycoon Thomas J. Barrack Jr., is teaming up with a Saudi prince to buy Fairmont Hotels & Resorts Inc. for $3.2 billion, the companies said Monday.

The deal would add 87 luxury hotels to Colony’s Raffles chain, including Fairmont properties in San Francisco, Newport Beach and Santa Monica. Raffles has a strong presence in the Far East; Fairmont is focused on North America.

Colony’s partner in the deal is Kingdom Hotels International, headed by Alwaleed bin Talal, the world’s fifth-richest person.

Privately held Colony Capital and Kingdom Hotels would pay $45 a share for Toronto-based Fairmont, which has been in play since billionaire Carl Icahn revealed in November that he had accumulated a 9.3% stake and was pressing for a sale.

Fairmont fielded more than half a dozen offers, but spokesman Daniel Gagnier called the Colony-Kingdom deal “the best transaction for delivering immediate value� to shareholders.

The sale, subject to approval by regulators and Fairmont shareholders, is expected to close in the second quarter. The combined company would own 120 hotels in 24 countries. Fairmont and Singapore-based Raffles would keep their brand names.

Barrack, Colony chairman and chief executive, couldn’t be reached for comment. In a statement, he called Fairmont and Raffles “an excellent strategic fit with rich histories, global brand recognition and complementary destinations.�

Colony, launched in 1991, manages more than $6 billion for institutional investors.

Icahn, the activist investor who is pursuing a takeover of Time Warner Inc., stands to clear $116 million on his Fairmont investment, a profit of 63%.

On Nov. 7, he disclosed buying 6.7 million shares for $185.1 million, or an average of $27.63 a share, and in December he offered $40 a share for a controlling stake, but the company’s board urged that bid be rejected.

The Colony-Kingdom bid represents a 28% premium to Fairmont’s closing price Nov. 4, the last trading day before Icahn’s original disclosure, although the shares have surged recently amid deal speculation.

In Monday’s trading after the announcement, Fairmont shares rose 45 cents to $44.27.