Sultan 'bids pounds 300m' for top hotel
Forte sale of Grosvenor would hurt Granada's pounds 3bn takeover assaul t
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The Sultan of Brunei, the world's richest man, is understood to have made a pounds 300m offer to buy Forte's prestigious Grosvenor House hotel in London's Park Lane. The Sultan already owns the Dorchester next to the Grosvenor, which makes profits of around pounds 15m a year.
Selling the Grosvenor could damage Granada's frontal pounds 3.3bn takeover assault on the country's largest hotels operator. At a stroke it would erase almost a quarter of Forte's pounds 1.3bn mountain of debts.
Investors yesterday showed signs of concerns about Granada's ability to win the fight. Granada's shares, which were just 3p shy of 700p on the eve of its bid move a fortnight ago, dropped 11p to 634p. Yesterday's movement increased the difference of Granada's cash and share terms. Forte's market price of 338.5p, up 0.5p, is now 12.8p above the value of the bid terms, compared with 9.3p at the close of dealings on Thursday.
One dealer said that an unknown American client of one of the big broking houses was trying to sell up to 3 million shares in Granada. "Nobody wants them ... and it will probably take him until the middle of next week before he can dump them," the dealer added.
On the Sultan's offer, industry sources said that Forte was keen to secure a management contract to run the Grosvenor if it accepted. The sources also said that Forte had simultaneously made an approach to the Sultan to manage the Dorchester.
It is believed that Forte's board considered the offer at a meeting yesterday. There was widespread speculation about a possible deal with the Sultan in early summer.
Forte declined to comment on what businesses - other than the US Travelodge and White Hart hotel chains - it plans to sell. There was a broad hint in the defence document, released yesterday, that it would sell some trophy hotels: "Realising the value of significant hotel assets, whilst retaining management contracts, is fast becoming an attractive option as the hotels market strengthens," the document said.
There is additional speculation that Forte is aiming to sell three other London hotels, the Russell, George and Cavendish - which analysts calculate could fetch pounds 125m - and four overseas. Forte also declined to comment on speculation that it was considering offers for the Wheeler's fish restaurants.
The official line in the defence document was that further disposals were in the pipeline to realise over pounds 200m. The Sultan's offer is understood to have been made while the document was being printed. Granada and leisure analysts in the City said the defence document was "tame" and raised more questions than it gave answers about Forte's own plans to demerge.
John Dear, managing director of Lazard Bros, the merchant bank advising Granada, said: "The defence document is extremely thin. We thought they were going to give clear detail of their demerger. All they say is wait and see, and we'll do it some time next summer. That is an odd thing to say to shareholders."
He also criticised Forte's forecast of a profits rise of at least 46 per cent to pounds 185m for the financial year to the end of January. "This is only a 7.5 per cent return on net assets. We could do better just by sticking the money in the gilts market."
Asked whether Granada's share price fall could hinder the chances of increasing the bid terms, Mr Dear said: "It is far too early to talk about a higher offer - you go through phases in any bid. Shares go up and they go down."
Keith Hamill, the finance director of Forte, dismissed Mr Dear's attack. "Granada has consistently put up a five-year record of this company [Forte]. I would do the same if I was them ... but the three-year record since Rocco took over control of the company as executive chairman is impressive."
Comment, page 25
Forte's Defence
Pre-tax profit up 46% to at least pounds 185m before exceptional profits
Earnings per share up 40% to at least 14.1p before exceptional profits
London hotel revenue per available room up 14%
UK provincial hotel revenue per available room up 7%
International hotel revenue per available room (excluding Paris) up 9%
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