Granada dismisses Forte's 'cherry-picking' bid

Granada, the media and leisure giant, has rejected out of hand what insiders dismissed as a "cherry-picking" pounds 1bn bid by Sir Rocco Forte for a selection of Granada's Exclusive and Meridien hotels.

Sir Rocco made his formal offer for most of the Meridien chain and some of the Exclusives late last week, but informed sources within Granada said the price was between 20 per cent and 30 per cent below the valuations Granada had established for the properties.

In a statement released last night, Sir Rocco said: "I am sorry Granada has decided not to follow up what we consider to be a good offer."

Sir Rocco, who earlier this year lost a bitter battle for his family company, Forte, could call upon as much as pounds 2bn to buy back some of the hotels he lost in the pounds 3.9bn takeover, sources in the Forte camp said.

Backing Sir Rocco are venture capital firms CinVen, Pru Venture Management and Electra Fleming. JP Morgan has arranged debt financing, with the support of Midland, SBC Warburg and UBS.

The offer was formally rejected by Granada on Wednesday. A close source to Granada said: "Given the nature of [Sir Rocco's] backing, and the returns that venture capital firms demand, it is unlikely that he could have bid a price acceptable to Granada and kept his investors happy."

A source close to Sir Rocco said: "He has obviously put together a plan for buying hotels, and he knows this business well. It seems clear that financial institutions are comfortable with the valuations he has put on the hotels he would like to buy."

Granada last week confirmed it would sell by auction 17 Exclusive hotels but would retain for the "immediate future" the Meridien hotel chain, on the books at about pounds 900m. A sales memorandum containing details of the auction has already been sent to some prospective buyers.

Granada is prepared to entertain bids for individual properties, or for groups of properties, but has precise targets in mind for the range of luxury hotels, which include the Grosvenor House in London and Westbury in New York.

"We were happy to entertain [Sir Rocco's] offer, but were not interested in a cherry-picking exercise," a source familiar with the sale talks said. "We believe that we can generate better value for Granada shareholders by keeping and developing the Meridien hotels."

The City expects Granada to review its policy on Meridien at a later date, possibly selling the chain once yields have improved.

A Granada source said yesterday that the company was open to an offer from Sir Rocco for the properties it has identified for sale. But Sir Rocco, whose aim is to rebuild a chain of upmarket hotels, said: "We have no interest in buying the Exclusive hotels without Meridien but have many other opportunities available to pursue."

It is believed that yields at the Exclusive are sharply lower than those at Meridien, but Granada still expects to send out more than 100 sales memoranda in the next few days.

The sale of the Exclusive hotels marks the start of a massive disposal programme at Granada, which is aiming to pay down the debt it took on to win its takeover of Forte. It has also earmarked Forte's 68 per cent stake in the Savoy Group of hotels, as well as a stake in Alpha Airports and Forte's chain of Welcome Break motorway service areas.

It is keeping Forte's mid-market and budget hotels, as well as the chain of roadside restaurants trading as Happy Eater and Little Chef.