Forte strikes Savoy deal: The imminent end of a 13-year battle between arch rivals will create the biggest luxury hotels group in the world

RIVAL hotel groups Savoy and Forte have secretly agreed a peace deal which is set to end their 13-year battle and create the largest luxury hotels group in the world.

In a dramatic end to hostilities, which was hammered out between Rocco Forte, chairman of Forte, and representatives of the key trusts which control the Savoy group, Savoy is set to inject all its hotels into a joint venture with Forte.

That will effectively end Savoy's independence after a struggle against a succession of would-be predators dating back to the 1950s.

A deal has been worked out between three key trusts, which hold around 40 per cent of the votes in Savoy, and Forte, which owns 68 per cent of the share capital but only 42 per cent of the votes.

Under the new arrangement, Savoy and Forte would form a joint venture with independent management. The venture would bring together all Savoy hotels, including the Connaught and Claridge's, and some or all of the hotels Forte classes as 'Exclusive'.

These range from the Grosvenor House and the Hyde Park in London to the Georges V and the Plaza Athenee in Paris. They are run separately from Forte's other hotels, which are grouped into clear market segments. The exclusive properties are so independent that guests are not made aware of their ownership. This should meet Savoy's objection to its hotels joining a much larger and more diverse group.

The scheme was devised, not by Forte's normal advisers, S G Warburg, but by the American investment bank Morgan Stanley, which is understood to have refused to share the work with Warburg. This is the latest in a series of setbacks for Warburg, which was recently censured by the Stock Exchange over its conduct during the Enterprise Oil bid for Lasmo.

Morgan put its plan to Rocco Forte, and the Hon John Sinclair, who represents three key Savoy trusts: the family settlement established by the late Sir Hugh Wontner, who was the Savoy's long-serving chairman, which owns 11 per cent of the shares; the trust established by the late Dame Bridget D'Oyly Carte, one of Wontner's staunchest allies and granddaughter of the man who built the hotel, which owns 14 per cent; and the Savoy Educational Trust, which owns another 11 per cent of the votes.

The complex two-tier share structure was the result of a scheme approved by shareholders as a defence against a 1953 attempt to take over the Savoy by two property tycoons, Harold Samuel and Charles Clore. At Wontner's instigation the stockbrokers Cazenove & Co devised a new share structure, issuing new B shares which had 10 votes per share, while holders of the existing equity had only one each.

The defences later prevented Lord Forte - Rocco's father - from achieving his lifelong ambition to take over the hotels. The Forte group has been buying shares since 1981.

A temporary truce was agreed three years ago in which Rocco and his finance director, Donald Main, were given seats on the board in exchange for an agreement by Forte not to bid for the rest of the shares for five years.

But relations remained strained, with Rocco and the Savoy's managing director, old Etonian Giles Shepard, sniping at each other. Earlier this year Rocco blocked the appointment of Sir Roger Gibbs, chairman of the Wellcome Trust and a director of Arsenal Football Club, as chairman to replace the present incumbent, the 73- year-old Sir Anthony Tuke, who admitted he was 'playing in injury time'.

Savoy put up a sterling defence, but it ultimately depended on the management showing it was making the group more efficient. What scuppered it - and may cost Mr Shepard his job - was a series of poor results as Savoy was hit far harder by the recession than Forte. Pre-tax profits peaked at pounds 13m in 1989 on turnover of pounds 89m. In 1992 the group lost pounds 1.4m. Last year they bounced back, but only to pounds 725,000 and the dividend was halved.

This gave Sinclair his opportunity since, he argued, the trusts had to take steps to maximise their income. Earlier in the year Rocco had suggested reversing some of Forte's finest hotels into Savoy - in exchange for enough shares to give it control.

This idea was bitterly opposed by the Savoy board, which rejected another Forte idea - that its hotels would be included in Forte's worldwide booking network.

But that formed the kernel of the Morgan Stanley plan. Last month, the Savoy's directors issued a short statement saying that they were aware of discussions taking place which 'could extend the area of cooperation between Forte and these trusts in relation to the management of the Savoy'.

Rocco Forte and the representatives of the trusts also agreed not to comment on the discussions until an agreement had been hammered out.

Under the new arrangements, which are due to be confirmed at the next Savoy board meeting in September, Sinclair, 41, would be chairman of the joint venture. He is the son and heir of Viscount Thurso and started his career at the Lancaster Hotel in Paris - now owned by the Savoy Group. He now runs the East Sussex Golf Club, venue for next month's European Open Golf Championship, and Horsted Place Country House, a Kuwaiti-owned luxury hotel nearby.

(Photograph omitted)