City warming to Rocco buyout

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The Independent Online
JOHN EISENHAMMER

Financial Editor

Big City institutions were last night showing initial support for Sir Rocco Forte's intention to buy back many of the hotels lost to the Granada takeover.

One senior fund manager said: "Rocco has more than a fighting chance of getting the equity backing he needs. Institutions are flush with cash and he has gained sufficient friends in the City by his defence."

Just 24 hours after losing control of the Forte empire to Granada, Sir Rocco announced his intention to lead a management buyout of the 167 Exclusive, Meridien and Heritage hotels with a book value of pounds 2.5bn. He is expected to seek a substantial amount of equity from institutions, with a pledge to float shortly afterwards. "He needs sufficient equity backing before raising the sort of debt required for a bid to proceed," a corporate banker said.

In a guarded response, Granada said it had only ever declared its intention to sell the Exclusive and Meridien chains. "In parallel with discussions with other interested parties, Granada would be happy to consider any proposal that Sir Rocco may wish to make concerning these particular brands, once he and his team are in a position to put forward a serious offer."

Analysts said a Forte bid for the hotels as a block had several advantages over potential rivals, so he could afford to bid more. "Rocco knows all about the businesses, where the profits are, while everyone else is bidding blind. He stands the best chance of keeping the lucrative management contracts, and a block deal could be done in a tax-efficient way for Granada," said one investment banker.

Accor, beaten to Meridien by Forte when Air France sold the four-star chain in 1994, is believed to be interested in these hotels again. Speculation has also centered on the US buyout specialist Kohlberg Kravis and Roberts as a possible financial purchaser. "But we have found nobody else internationally who is interested in buying all the assets. Many just want bits," a corporate financer said.

The Forte family will net about pounds 320m from selling its shares to Granada, and is reported to have lines of credits for another pounds 250m.

One institutional manager said: "That is a good basis for attracting equity from institutions for a bid. There is a lot in the idea that appears sensible."

Exclusive group's 18 luxury hotels include the George V in Paris and London's Grosvenor House. Meridien is made up of 85 business hotels, while Heritage comprises 52 inns.

Granada's bid was yesterday declared unconditional.

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