City: Closing a deal is not his Forte
The episode was doubly unfortunate for Rocco. Not only did it leave him with a black eye, but it made him seem faintly ridiculous, accident- prone and not in control of his own destiny. In the City, too, Rocco has always had a credibility problem. It is often said that if Rocco were not Charlie Forte's son, he could never have hoped to have been chief executive of a big public company.
Only some of this criticism is fair. Rocco was taken for a ride when he bought the Kennedy Brookes restaurant chain: he paid pounds 1 for 50p. And the timing of his pounds 16m initiative to brand the group's hotels just as the recession began to bite deep was all wrong. But on the whole his reign has been competent, if undistinguished. It can be as much a handicap as an advantage to be your father's son in business. Rocco has managed to dispel at least some of the early doubts.
Until, that is, last week's botched attempt to sell Forte's Gardner Merchant contract catering business. Whatever the truth of events - and there are plenty of different versions - it has caused all the old City concerns to surface once more. In a less dynastic empire it might have dislodged him, some say. As it is, Rocco will probably live to fight another day. With his father, Lord Forte, still in the chair, and the family controlling about 20 per cent of the shares, Rocco's position appears to be in little immediate danger. He had better start watching his back, however. Over the last couple of months, Forte's share price has underperformed the rest of the market by a fifth. With hotel occupancy badly hit by recession, the dividend looks to be in some danger.
The latest debacle bears some repeating. A month ago Forte announced it was in talks to sell Gardner Merchant to a combination of Compass Group and ARA of the United States. It expected the deal to be completed within three weeks. On Friday negotiations collapsed amid bitter recriminations on both sides. The Compass camp roundly blame Rocco for the failure. He threw tantrums, was unreasonable, didn't know how to negotiate, didn't understand finance and worst of all, he went against his own advisers, Warburgs and UBS Phillips and Drew, in turning down the pounds 530m eventually offered, they claim. At the end only pounds 5m separated the Compass bid from Forte's reserve price but by then Rocco was in such a state that he was incapable of accepting Compass on any terms.
Rubbish, says Rocco. He would never have opened negotiations with the Compass camp in the first place had he known they were prepared to pay only pounds 530m. Whomever you believe, the episode has proved highly embarrassing to both sides. And for Forte, it has created a special difficulty. Having made the City believe the company needs and wants to sell Gardner Merchant so as to pursue its strategy of expansion on the Continent, Rocco has boxed himself in. If he fails to deliver, a credibility problem may turn into something rather more serious. Rocco insists there are still other serious bidders in the wings. For his own sake, let's hope he's right.
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