Forte's defence bill could exceed pounds 35m

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The Independent Online
The besieged Forte hotels group is continuing to recruit more advisers, and looks set to run up a defence bill of more than pounds 35m in its struggle to defeat the hostile pounds 3.3bn takeover bid from Granada.

Since Sunday, Forte, headed by Sir Rocco Forte, has enlisted additional help from Roberto Mendoza, vice president of JP Morgan, and Cazenove, the blue-blood stockbrokers. Makinson Cowell, the investor relations specialists, was yesterday drafted into the defence team. One leading merchant banker, who requested not to be named, estimated the cost of Forte's army of defenders at a "conservative" pounds 35m. "That may well rise considerably if Forte remains independent and has to pay success fees," he said.

The defence team also includes two other merchant banks, SBC Warburg and Morgan Stanley, the UBS stockbroking firm, and Brunswick, the City public relations firm. The merchant banker reckoned that the merchant banks and stockbrokers would cost Forte between pounds 25m and pounds 30m, excluding expenses. "Accountants and solicitors would cost at least pounds 2m to pounds 3m. Brunswick pounds 1m, and Makinson Cowell another pounds 500,000." Forte is also having its hotel estate revalued which he estimated would cost around pounds 1m.

Forte declined to comment on how much its defence would cost. If pounds 35m is an accurate figure it equates to about 27 per cent of Forte's taxable profits of pounds 127m in the last full year.

IBCA, the credit rating agency, yesterday expressed concern about Forte in the wake of the company's plan to split into two should it defeat Granada. The agency said it had placed long and short-term debt ratings of Forte on ''rating watch'' with negative implications.

There were also widespread rumours that Forte's meeting with institutions in Scotland on Tuesday had not gone well. "We've heard that shareholders were unhappy that Forte had not seen them for months... and we also heard that one shareholder said Forte would be better off selling trophy hotels and investing the proceeds in gilts," said one City dealer.

Forte's shares fell a further 0.5p to 337.5p, while Granada advanced 2p more to 655p. That improved Granada's cash and share terms from 330.8p to 331.3p per Forte share - just 6.2p shy of the current market price. Analysts said that Forte would have to produce a "very strong" defence document to stem the negative tide.

Meanwhile, Forte continues to sell off unwanted businesses. The latest to go is Griersons, the wine merchant, sold to Matthew Clark for pounds 23m.

Granada chief executive Gerry Robinson pointed out that Griersons made only pounds 1m on turnover pounds 76m, compared with the pounds 5.3m Clark made from its Freetraders operation on pounds 121m turnover. "Before you sell a business you have to get operating profits up, otherwise you're selling on the cheap."

Mr Robinson also promised to retain Forte shareholders' perks. Gold Card hotel discounts would be honoured.