Osmond tastes defeat in Six Continents battle

Hugh Osmond was last night forced to abandon his £3.9bn hostile bid for Six Continents after shareholders in the leisure giant voted overwhelmingly to back the management's plans to spin off its pubs arm.

More than 95 per cent of votes cast at yesterday's extraordinary meeting supported the proposed split, as shareholders ignored calls from Mr Osmond for them to approve his motion to postpone the decision.

Analysts said that defeat for Mr Osmond, who was bidding through his AIM-listed cash shell, Capital Management & Investment, was likely to spark a separate bidding war for Six Continents' hotels and pubs businesses once they start trading as individual companies next month. KKR, Blackstone and CVC Capital are among private equity groups circling the business, while Marriott, Starwood and Hilton are all interested in the hotel arm.

Mr Osmond, who made his name at PizzaExpress in the early Nineties, dismissed suggestions that failure had damaged his credibility. He said he was eyeing other companies that looked good value, but said the separate pubs group – to be called Mitchells & Butler – did not top his list of targets. "It's a shame we didn't win but it was a good fight and we'll be back," he said.

Six Continents' victory came at an eventful meeting that lasted more than four hours after Mr Osmond exercised his right to call for a formal poll of votes cast on his adjournment motion.

"This was very much the shareholders' day. We're obviously very pleased with the outcome," Tim Clarke, the group's chief executive, said. Making an effort to rebuff criticisms that the board was unreceptive to takeover approaches, Mr Clarke pointed to the creation of a special "bid committee" staffed by its three most senior non-executive directors, including Roger Carr and David Webster, the Safeway's chairman who will become deputy chairman of the hotels arm after the split.

Speaking after the meeting, Richard North, the chief executive-elect of the hotels business, said any potential takeover deal for the entire group would "be done on a friendly basis". He revealed that the group had come "very close" to agreeing to a merger with a hotel group early last year, but said the talks had fallen apart over the value of its pubs estate. "Everybody has spoken to us ... we have become the most interesting company in the hotel industry. We will have to see what happens," he added.

During the meeting, which was attended by all five CMI directors, Mr Osmond said postponing the vote was "as close as you can get in investment terms to a one-way bet". He claimed the current executive board had been responsible for 10 years of "value destruction", warning: "Leopards do not change their spots, management do not change their ways and this demerger does not change this management."

The value of CMI's failed cash-and-shares bid sunk from £5.6bn to £3.9bn after a 5.5p fall in the company's share price to 12.5p. The bid cost CMI shareholders around £8.5m.

Shareholders voted three to one against Mr Osmond's motion. Around 98 per cent of votes cast backed the demerger.