Ciga's share price has soared since Sheraton made its bid before Christmas, and has made it virtually impossible for the US group to gain a controlling share stake.
Arbitrage trading by several of the 22 shareholding banks has pushed the price of Ciga's shares through the roof to as much as L1,300 (55p) - 75 per cent above the L740 a share offered by Sheraton.
This has resulted in Mediobanca, the leading creditor, saying it will be unable to deliver a controlling 50.1 per cent stake into Sheraton's hands.
Sheraton's bid was 20 per cent higher than the joint offer tabled by Forte, the UK hotel group, and George Soros, the US investor.
Forte said it had factored in the arbitrage problem in its own bid. The root of the problem is that during takeover bids in Italy only existing shareholders can trade in the target's shares.
Analysts say the arbitrageurs can now only recoup their money if Sheraton takes leave of its financial senses, or by piecemeal sales of Ciga hotels.
Sheraton's removal of teams that were actively integrating the business and working to bring the hotels up to international standard has been construed as an attempt to cool Ciga's share price - currently L1,270.
Sheraton's bid is, by analysts' calculations, very generous. And Ciga needs at least dollars 200m ( pounds 138m) of investment to bring its 35 hotels, which include the Danieli in Venice, up to scratch.
Sheraton is putting a relaxed public relations face on the mess. 'We are not withdrawing our bid. But if it doesn't happen, then it doesn't happen,' a spokesman said yesterday.
If the share price holds at its inflated level, then it is reasonable to assume that it will not happen.
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