Granada acquires maximum stake

Shifting shares

MATHEW HORSMAN

An increasingly confident Granada yesterday raised its Forte stake to the maximum level allowed under Takeover Panel rules, fuelling belief that it will now easily win its pounds 3.8bn hostile bid.

Barring a radical response from Forte, which analysts did not expect to materialise, the odds have moved sharply in Granada's favour.

The television and leisure company bought another 0.7 per cent of Forte, the target of its hostile bid, taking its holding to the maximum allowed of 9.9 per cent, worth pounds 386m.

Meanwhile, several leading institutions confirmed yesterday that they had tendered shares to Granada in its morning raid on Tuesday. They included Hermes, the pension fund of the Post Office, which normally supports management against hostile bids. Hermes indicated yesterday that the sale did not mean it had decided to back Granada.

Mercury Asset Management, which had owned 15 per cent of Forte, tendered 9 million shares, taking its stake down to 14.63 per cent.

MAM's chief strategist, Carol Galley, is believed to support Granada in the acrimonious battle, and is expected to tender MAM's 168 million remaining Forte shares by the bid close on Tuesday.

Forte said the mop-up operation proved that Granada had not been able to buy all the shares it wanted in Tuesday's raid.

A spokesman said: "The vast majority did not sell their shares, and this shows there is good support from our shareholders."

Several analysts have now publicly recommended that Forte shareholders accept the cash-and-shares offer, which values the hotels and restaurants group at 385p.

Among the houses holding out yesterday was Goldman Sachs.

The warring sides again traded statistics and criticisms yesterday, following publication in the morning of a new document by Granada, aimed, it said, at "returning the debate to fundamentals."

Granada attacked Forte's defence strategy, claiming that the target company's share buy-back scheme was flawed and that it had promised an "imprudent" dividend commitment of 20 per cent rises in each of the next three years.

Forte said the document "contains nothing new" and that "the figures it uses are simply wrong."

The two companies have disagreed about the earnings potential of Forte following a planned asset disposal programme, and about the likely level of the company's share price if the Granada bid fails.

Granada's finance director, Henry Staunton, yesterday sharply criticised what he called Forte's "selective" use of figures in its defence strategy. "Our figures are transparent, and are hard numbers," he said. "We feel that Forte has been picking and choosing to suit the case, using one tax rate for one set of forecasts, and another figure for something else."

A Forte spokesman shot back: "For Granada to accuse us of being selective when they have done a complete strategic U-turn is rich indeed."

Asked again to explain the strength of Granada's share price following its increased offer, a Granada source said the stock's strong performance underlined the market's belief that the bid would succeed and that the company's management would be able to achieve the promised profits enhancement.

Granada closed unchanged at 693p, having traded lower in early trading. Forte ended the day at 377.5p, down 3p.

Forte shares sold by top City institutions to Granada:

Lloyds Inv Managers 1.2m

Sun Life Inv Mgmt 2.5m

Hermes Inv Mgmt 3m

Stanhope 6.3m

Mercury Asset Mgmt 9m

Capital Group 10.5m

Oops ...

Finance directors from each of the warring Forte-Granada camps have both got egg on their face as the hostile bid moves towards a climax. Yesterday, the Forte finance director Keith Hamill (above right) was forced by the Takeover Panel to clarify remarks which seemed to draw a comparison between the illegal share-support scheme operated by Guinness in its disputed takeover of Distillers in 1986 and the rising value of Granada's shares in the current bid for Forte. Last week, Forte issued a writ against the Granada finance director Henry Staunton (above left) for remarks attributed to him. Mr Staunton appeared to suggest Forte had set out to mislead shareholders in its defence document. The writ against Mr Staunton remains outstanding. Neutral observers suggest both men may be getting tired, following weeks of long hours, hundreds of meetings and endless phone conversations.