Bass set to snap up Inter-Continental with pounds 1.7bn offer

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The Independent Online
BASS is poised to buy Inter-Continental, the upmarket hotel group, in what promises to be the biggest deal it has ever made. The British brewing, hotels and leisure giant is understood to be on the brink of signing a deal to purchase the 211-strong hotel chain for more than $2.8bn (pounds 1.7bn) from Seibu Saison, a private Japanese group.

Bass has fought off stiff competition from Marriott International and Patriot American Hospitality, the US hotel magnates, and Ladbroke Group, the UK leisure group, to win a bidding war for Inter-Continental. The acquisition is likely to be announced within days.

Inter-Continental would be a good fit for Bass, which owns the Holiday Inn chain but lacks a strong, five-star, luxury hotel brand.

The two groups would also complement each other geographically. Holiday Inn has a big presence in the US, while Inter-Continental is stronger in Europe and the Far East.

One City observer said: "This deal makes a lot of sense strategically. Bass has lacked a top-quality hotel brand and this deal plugs the gap that the group had in its portfolio and gives it a good presence around the world."

Bass shares fell 26.5p to 960p, however, over fears that the group may overpay for Inter-Continental. Mark Finnie, leisure analyst at NatWest Securities said: "We estimate that Saison makes an EBITDA, [annual profit before interest, tax and depreciation] of around $180m. If Bass pays more than $2.8bn the deal will be on a very punchy multiple."

Another industry analyst said: "The share price fall reflects nervousness that Bass has been forced to pay too much to win the bidding war. The group is dripping with debt and nobody is quite sure how much debt will be included in the deal."

The deal will create one of the biggest hotel groups in the world. Inter- Continental has 211 hotels in 77 countries and 24 more under construction. Of these, 117 trade under the Inter-Continental name, including London flagship hotels on Hyde Park and Mayfair and there are hotels in most of the main capitals of Europe. It has sites throughout Asia including three in Japan, and a large hotel in Seoul, South Korea. The group also has 20 mid-market Forum hotels and 50 Global Partnerships, where it has teamed up with local operators to run sites.

Bass already has 2,380 hotels, including almost 1,600 Holiday Inns. It has 134 Crown Plaza sites, its own upmarket brand. Analysts believe they could eventually be converted to Inter-Continental sites as the group seeks to create a strong position in the premium hotel market.

The deal caps a period of frenetic corporate activity that has seen Bass sell off its tenanted pub estate, the Coral betting chain and Gala bingo.