Modest rise for Jarvis debut

Investors expecting more instant profits from the new issues market were disappointed yesterday when shares in Jarvis Hotels managed only a modest premium on their first day of dealings.

The stock closed at just 5p above its 175p issue price, after touching 193p, despite the flotation being heavily oversubscribed. More than 11 million shares changed hands, however, making Jarvis the second most heavily traded stock on the Exchange.

The company said more than 25,000 members of the public had applied for shares in the mid-market hotel chain. They will share 8.37 million shares, representing about 10 per cent of the offer. Apart from a handful of employee shares, the rest will be allocated to institutions, who applied for 6.75 times the number of shares on offer.

At the close, Jarvis was valued at pounds 320m, well in excess of its estimates in May, when it announced plans to float, of between pounds 260m and pounds 280m.

The success of the issue follows the successful listing of other hotel companies this year, including Millennium & Copthorne, Macdonald and Cliveden.

Jarvis was founded in 1990 by John Jarvis, chairman and chief executive, who had previously run Ladbroke's Hilton International arm. The group's first move was to acquire 41 Embassy Hotels from Allied Breweries. Two years ago the company bought 20 more hotels from Resort Hotels.

Jarvis now owns and operates 62 mid-range hotels in the UK with a total of about 5,000 rooms. The company focuses on the business, conference, and weekend getaway markets under brand names including Summit Conferences, Sebastian Coe Health Clubs, and Embassy Leisure Breaks.

Analysts believe Jarvis has come to the market with a strong management team, a good track record and prospects of substantial growth in a hotel sub-sector that is itself riding a buoyant wave. Merrill Lynch estimates profits rising by more than 25 per cent in each of the next two years, driven by higher occupancy and higher room rates.