Bock swaps banks for hotel flotation

Lonrho, the hotels-to-mining group undergoing a demerger initiated by its chief executive, Dieter Bock, is poised to appoint investment bank SBC Warburg as adviser for the flotation of its Princess Metropole Hotels division.

The move is being seen by banking sources as a slap in the face for Deutsche Morgan Grenfell, the blue-chip investment bank that Mr Bock brought in to advise him. Mr Bock's relationship with DMG sprang from his German nationality. In 1994, Mr Bock ousted chief executive Tiny Rowland, the group's creator, in a boardroom coup.

The relationship between Mr Bock and DMG is now seen to be under some strain. One adviser working on the demerger said: "DMG underestimated the complexities of the deal."

Lonrho is understood to be disappointed with progress after initial assurances from DMG that work would be completed by July. In January, Mr Bock announced Lonrho was looking to split its mining and non-mining assets into two separate listed companies, after DMG had said a demerger should be relatively straightforward. An announcement was expected in July.

But at the time of the interim results a fortnight ago, he backtracked to disclose a revised plan. Under this, the group will split into three parts: hotels, mining, and the African trading businesses, which will include Lonrho's other non-African trading operations.

Mr Bock said the demerger was behind schedule, chiefly for tax reasons. There are other factors. DMG has found that unravelling the different companies under the Lonrho umbrella, and their reporting arrangements to head office, is a far harder task than it had anticipated.

The first company to be spun off, Princess Metropole Hotels, owns hotel chains in the UK, US, and South America. To facilitate the deal, Lonrho has agreed to pay $389m (pounds 256m) to the Libyan Arab Foreign Investment Company for the latter's one third stake.

A deal is likely to raise between pounds 700m and pounds 900m for Lonrho.

DMG was also the group's adviser to the failed platinum merger between Lonrho's Western Platinum and Gencor's Impala Platinum. The deal was cancelled when the EU ruled it was unacceptable on competition grounds. Executives at DMG were unavailable for comment on Friday.

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