Bass looks to break off bars for £3bn bonus

Bass, the hotels and pubs group, is considering demerging its branded bar and restaurant division to create a company worth £3bn.

Bass, the hotels and pubs group, is considering demerging its branded bar and restaurant division to create a company worth £3bn.

The split would include its All Bar One, Browns, O'Neill's and Harvester chains which would be listed as a separate company on the FT-SE.

Sources close to Bass's board said that the idea has been discussed between group chief executive Tim Clarke and executive chairman Sir Ian Prosser as a means of unlocking the value in the leisure conglomerate. The impetus is thought to have come from Mr Clarke, who became Bass chief executive in September after heading up the pubs arm. At 43, Mr Clarke is understood to be eager to shake up Bass, which has been viewed as a solid but unexciting company.

Fresh from selling its brewing interests to Belgium's Interbrew for £2.3bn, Bass's board is keen to concentrate on its hotel interests. As well as giving Bass a pure hotel focus, a demerger of its bars and restaurants would give Bass shareholders something to toast. Analysts estimate the demerged company would be worth around £3bn. With Bass's market capitalisation standing at £6.1bn and its hotel business valued at £6bn, the company's break-up value stands at over £9bn.

While the idea of a demerger has been discussed at boardroom level, it is unlikely to go ahead until early 2001. This is because Bass is also in the process of selling its portfolio of 900 unbranded pubs through investment bank Schroder Salomon Smith Barney. The sale is expected to raise between £500m and £900m and is thought to have caught the eye of Japanese investment bank Nomura, venture capital-backed Punch Taverns and quoted pub company Enterprise Inns.

However, Bass isn't the only company off-loading its pubs estate. Whitbread is selling 3,000 pubs with a price tag of £1.5bn and the City is expecting Scottish & Newcastle to review its pub holdings shortly. Analysts predict that between 15 per cent and 20 per cent of Britain's 65,000 pubs are either on the market or are likely to be for sale in the next few years.

Nigel Popham, analyst at Teather & Greenwood, said: "It is entirely possible that Bass will demerge its branded pubs and restaurants. But there is an element of uncertainty given all the pubs on the market."

Mr Popham added: "The impression I get is that Bass is keen on hotels but cooler on pubs. It all boils down to growth prospects. Hotels can be expanded internationally whereas pubs and bars are an old-fashioned industry with few prospects for growth."