Granada's chief executive Gerry Robinson last night signalled a knife- edge finish to his takeover fight for hotels group Forte, with an increased offer of pounds 3.8bn that falls short of a knockout blow.
Amid one of the toughest takeover fights seen in the nineties, Granada's new terms are worth about 373p a share compared to the initial bid of 327p.
"It will be much or difficult for Forte to remain independent now," said a leading leisure analyst.
But other analysts added that Granada would still have to provide greater details on its plans to enhance profits at Forte's restaurants and hotels operations if its bid succeeds. "This is not a killer offer," said one. "It comes down to who can manage better, and precisely what kind of company - a pure hotels group or a hotels-and-food combination - investors want."
The City was also impressed by the way Granada raised its offer - using a tax-efficient special dividend of 47p payable to Forte shareholders once the bid is declared unconditional. For those institutional funds able to avoid tax, roughly 40 per cent of Forte's shareholders, the revised offer from Granada is actually worth 385p a share.
Granada also announced a separate agreement with the Council of Forte, which controls 0.08 per cent of the company's shares but 50 per cent of the votes. The Council has agreed to step aside, allowing ordinary shareholders to decide the outcome of the bid. Granada will pay the Council pounds 50m for its stake, which is to be used to finance charitable activities.
In a change of strategy, Granada chief executive, Gerry Robinson, promised to sell Forte's upmarket Meridien and Exclusive hotel chains, using the proceeds to help fund the special dividend. "We decided that we could not attach the same value to these assets as many hotel operators who willing to pay good prices," he said.
Mr Robinson hinted yesterday that he had never been wedded to the upmarket hotels. "We downplayed our intentions because we were bloody nervous that Forte might paint us as asset-strippers." But once Forte unveiled its own asset disposal plan, Mr Robinson said Granada became ''less sensitive" to the charge.
Granada hinted that at least four buyers had made approaches to buy the hotels - including trophy assets such as the Grosvenor House in London. Granada expects to be able to raise about pounds 2bn from the sale of the hotels, Forte's stakes in the Savoy Group and Alpha Airports, as well as the Welcome Break, motorway service areas. The company expects to bring gearing down to about 70 per cent after the disposals.
Forte immediately rejected the increased offer. Sir Rocco Forte, its chairman, said: "Now we see this bid for what it's worth - a 1980s style, highly leveraged asset strip which has nothing to do with management skills." A Forte spokesman added: "Robinson has turned his previous strategy upside down. He didn't expect the strong defence from Forte and has been forced to regroup. Now he is engaging in a firesale of assets. This approach is only a week old, and it shows."
The spokesman added that Granada's revised bid, funded by asset sales, showed the company "could not get backing for a real, substantive increase to reflect Forte's true value. Granada is clearly being pushed."
Granada responded that its financing arrangements were solid, and that sub-underwriting was significantly oversubscribed. On the question of strategy, Granada said the core assets it wanted - Forte's restaurants, and budget and mid-market hotels - would be a profitable addition to group businesses, and that the upmarket hotels would fetch good prices from trade buyers.
"We are now back to fundamentals in this battle," Mr Robinson said. "There has been a lot of huffing and puffing, but now shareholders have a real choice."
The starkness of that choice was echoed by fund managers, who said they would have to decide whether to stick to a pure hotels play with Forte - pocketing the proceeds of an pounds 800m share buyback funded by Forte's planned sale of its restaurants business to Whitbread - or bet that Granada's management team can provide long-term growth.
Said one leading fund manager: "We came into Forte because we believed that the hotels cycle was turning up. We haven't always been happy with Forte's management, but I'm not sure this is the time to give up on them."
The bid closes on 23 January. Granada shares closed last night at 637p, down 6p, while Forte was trading at 351, up 7p.
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