Forte's Gardner sale falls through

NEGOTIATIONS to sell Gardner Merchant, Forte Hotels' contract catering business, to Compass Group and its US partner in the deal, ARA Services, flopped yesterday after the two sides failed to agree on price.

When the deal collapsed the two sides were only pounds 5m apart. Compass had opened the bidding at pounds 580m, but after examining the 1,500 contracts, reduced its offer to pounds 530m. Rocco Forte, chief executive of Forte, wanted pounds 535m.

Sources close to the talks said Forte's brokers, SG Warburg and UBS Phillips & Drew, had advised Mr Forte to accept the offer.

Oliver Pawle, deputy managing director of UBS Phillips & Drew, said the price would not have been 'embarrassing' in itself, but it was subject to a number of conditions that would not have been met.

Mr Forte said: 'The talks broke down for a number of reasons, but basically because it became very clear that the likelihood of them being able to deliver was less and less.'

Compass reduced its offer as it became clear that a number of Gardner Merchant's catering contracts might have moved to another company if it took over.

Forte is to pursue other offers it has received in the past few weeks.

The failure of the sale to Compass will not affect Forte's plans to expand into Europe, according to a spokesman. It has a number of acquisitions in mind, though these would be small ones because the European hotel business is fragmented.

Compass shares, suspended when the talks began in late May, will resume trading on Monday.