Sonesta International Hotels Corporation (NDAQ:SNSTA) shares rose $3.51, to 8.67%, to $44.00 today after Mercury Real Estate Partners disclosed a 9.8 percent stake in the company and expressed its belief that the company's shares are worth $110 to $125 per share. Shareholders are hoping that the company's willingness to explore strategic alternatives combined with the involvement of this activist hedge fund will lead to a substantial buyout in the near future.

Mercury Real Estate Partners supported their $110 to $125 per share valuation with an in-depth analysis presented in their Schedule 13D/A filing with the SEC. The company's largest asset is its partnership in Key Biscayne which is worth approximately $73.35 to $80.45 per share based on expected cash flows priced out at industry multiples. This value alone surpasses the current market price substantially.

The company also owns Royal Sonesta Boston, which is worth $23.24 to $28.65 per share based on the same type of analysis. Finally, the company also has other hotel interests amounting to $4 to $7 per share along with cash amounting to $5.77 per share. Subtract the combined value of these entities with the companies few liabilities and you can see how a value of $110 to $125 per share is realized.

Clearly, there is substantial value present in Sonesta that well surpasses the price the market has put on its shares. Now that the company has decided to explore its strategic alternatives, it it quite possible that it will be able to unlock this value in the near term. This makes SNSTA a stock worth watching!

Related Companies
Great Wolf Resorts (WOLF)
Lodgian Inc. (LGN)
Starwood Hotels and Resorts (HOT)