Doubts grow over Granada's campaign for Forte

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The Independent Online
Doubts are growing in the City about Granada's ability to sell pounds 500m in assets earmarked for disposal should it win its pounds 3.3bn hostile bid for Forte.

One leading leisure industry analyst, who declined to be named, said Granada's chief executive, Gerry Robinson, "has really laid his reputation on the line".

"It is likely that the top of the hotel cycle will be hit next year, leaving him a forced seller at a time when hotel prices will be falling," the analyst said. "And who would want to buy Forte's 68 per cent stake in the Savoy group? Forte has spent 13 years trying to win voting control and has failed. And if there are plenty of buyers around for trophy hotels why aren't the deals being done now?"

The pounds 500m disposal plan is crucial to Granada's financing of the acquisition, the company concedes. Even after the sales, gearing will be 130 per cent. The television, rentals and catering giant is borrowing pounds 2.5bn to help finance its share- plus-cash offer.

There is also strong speculation that Forte is close to making several disposals, which could start to turn the tables on Granada: the White Hart to management, and the US Travelodge business. A queue to buy the US Travelodges started forming long before Granada launched its bid last week.

"At the end of the day, Gerry may have to save face and Forte save its empire by the two companies doing a deal over the Happy Eater and Little Chef chains," the analyst added.

There is also scepticism about Granada being able to sell the motorway service stations, and develop the Meridien hotel group that Forte bought earlier this year.

Forte's 22 motorway service sites might be worth between pounds 200m and pounds 250m. But analysts warn that trading conditions are difficult. Granada would have no choice but to sell the sites, for regulatory reasons, as it already owns 27 service areas of its own.

It insists that it has identified potential buyers, but will not name them. Possible bidders range from the brewer and caterer Whitbread to the competitor Road Chef. Foreign interest might come from the French caterer Accor or Germany's Movenpick.

Meanwhile, Mercury Asset Management, the largest of Granada's institutional shareholders, bought 30,000 additional shares yesterday. Separately, Forte announced the close of a deal it first announced before the bid, raising pounds 7.5m from the sale of a small distributor, Puritan Maid.