Forte's pounds 900m giveaway defence

JOHN SHEPHERD and MATHEW HORSMAN

The City is braced for a photo-finish in the dramatic, and extremely hostile pounds 3.2bn takeover bid by Granada for Forte, the UK household name in hotels and roadside restaurants.

Leisure analysts were yesterday stunned and surprised by what they called a "bold, radical and amazingly" open defence document from Forte which, for the first time ever, has given explicit details about hotel trading from occupancy and room rates through to a breakdown of the sales mix from management fees to receipts from catering.

Forte yesterday slammed the shareholder loyalty card on the table, promising to boost investment value through a pounds 662m share buy back, funded by the planned pounds 1.05bn disposal of the Happy Eater and Little Chef restaurant chains to Whitbread, and a pledge to increase dividends.

The company will boost the final dividend for the current financial year, which ends this month, by 21 per cent which will increase the total payout to 8.5p. Shareholders, if they reject the bid, are promised a 20 per cent dividend increase in each of the next three years.

Those increases, though, will only just about compensate for Forte's decision to hold its dividend in the 1992/93 year at 9.91p and the subsequent 24 per cent cut in payments to 7.5p the following year. Forte's promise of a dividend total of 14.7p in 1998/99, represents a 48 per cent increase over a six-year period.

Sir Rocco Forte, chairman and chief executive, said he was confident, however, that the company had done enough and promised enough to shareholders to remain independent "by a long chalk."

The company also plans to redistribute all its shares in the Savoy group. Analysts said the move meant the Savoy was being pushed a step closer to being a takeover target itself.

Forte will today host a full briefing session for analsysts. Over the next fornight two teams will brief institutional shareholders and private shareholders alike. "This is like doing a new issue," a Forte spokesman added.

Copious amounts of scourn was poured on the defence document by Charles Allen, chief operating officer and chief executive-elect of Granada.

"The financial strength of what they call New Forte would be weaker than a Granada/Forte combination," Mr Allen said. "This is just a quick fix. They'll be right back to being a pounds 900m debt company, with only a 5.8 per cent return on capital. Just to meet their dividend commitments, they'll have to double profits in three years. That's just not credible for a management with this track record."

Granada plans to refute the points in the defence document line by line in meetings with analysts and shareholders, a company spokesman said. The focus will be on Forte's planned sale of the restaurants business, which Granada does not favour, as well as Forte's revaluations of the hotels business and its revised profits forecast.

A raised bid was still held out as a possibility last night, according to Granada insiders. But a final decision will not be made until closer to the deadline of 9 January. A sweetener of between 5 and 10 per cent, as much as pounds 300m, was still considered most likely, although some analysts said a knockout bid would have to be close to 15 per cent higher.

Granada is also expected to provide further details of its plan to enhance Forte's profitability by pounds 100m a year, through cuts in head-office charges and the benefits of higher economies of scale on the food-purchasing side of the combined businesses.

Leading leisure analysts are divided over how the battle will finish. Several contacted yestertday said that Granada would have to bid more than 380p per Forte share to win. Forte's shares climbed 12.5p to 343p, while Granada closed 3p lower at 636p.

"On the basis of this defence document, the chances of Forte surviving are significantly greater," said one analyst "But it's not over yet."

Sir Rocco, though, said yesterday's share price movements were a clear indication that investors had imbibed the message from the defence document and were coming down on the company's side.

"I couldn't think of a better New Year present than this. We're a very asset rich business and will continue to be an asset rich business after this process."

Forte also intends to redistribute the company's holding in the low voting 'A' shares in the Savoy group, worth 23p per Forte share.

Savoy declined to comment on the share distribution. Forte plans to meet with Savoy shareholders to discuss a "clean" distribution of Forte's 168,000, high voting 'B' shares. There will also be changes to the Forte board.

Comment, page 15

Start your day with The Independent, sign up for daily news emails
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Pricing Analyst

£30 - 35k: Guru Careers: We are seeking a Pricing Analyst to join a leading e-...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K YR1: SThree: At SThree, we like to be dif...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is a mul...

Guru Careers: C# Project Team Lead

£55 - 65k (DOE): Guru Careers: A unique opportunity for a permanent C# Develop...

Day In a Page

Fifa corruption: The 161-page dossier that exposes the organisation's dark heart

The 161-page dossier that exposes Fifa's dark heart

How did a group of corrupt officials turn football’s governing body into what was, in essence, a criminal enterprise? Chris Green and David Connett reveal all
Mediterranean migrant crisis: 'If Europe thinks bombing boats will stop smuggling, it will not. We will defend ourselves,' says Tripoli PM

Exclusive interview with Tripoli PM Khalifa al-Ghweil

'If Europe thinks bombing boats will stop smuggling, it will not. We will defend ourselves'
Raymond Chandler's Los Angeles: How the author foretold the Californian water crisis

Raymond Chandler's Los Angeles

How the author foretold the Californian water crisis
Chinese artist who posted funny image of President Xi Jinping facing five years in prison as authorities crackdown on dissent in the arts

Art attack

Chinese artist who posted funny image of President Xi Jinping facing five years in prison
Marc Jacobs is putting Cher in the limelight as the face of his latest campaign

Cher is the new face of Marc Jacobs

Alexander Fury explains why designers are turning to august stars to front their lines
Parents of six-year-old who beat leukaemia plan to climb Ben Nevis for cancer charity

'I'm climbing Ben Nevis for my daughter'

Karen Attwood's young daughter Yasmin beat cancer. Now her family is about to take on a new challenge - scaling Ben Nevis to help other children
10 best wedding gift ideas

It's that time of year again... 10 best wedding gift ideas

Forget that fancy toaster, we've gone off-list to find memorable gifts that will last a lifetime
Paul Scholes column: With the Premier League over for another year, here are my end of season awards

Paul Scholes column

With the Premier League over for another year, here are my end of season awards
Heysel disaster 30th anniversary: Liverpool have seen too much tragedy to forget fateful day in Belgium

Liverpool have seen too much tragedy to forget Heysel

Thirty years ago, 39 fans waiting to watch a European Cup final died as a result of a fatal cocktail of circumstances. Ian Herbert looks at how a club dealt with this tragedy
Amir Khan vs Chris Algieri: Khan’s audition for Floyd Mayweather may turn into a no-win situation, says Frank Warren

Khan’s audition for Mayweather may turn into a no-win situation

The Bolton fighter could be damned if he dazzles and damned if he doesn’t against Algieri, the man last seen being decked six times by Pacquiao, says Frank Warren
Blundering Tony Blair quits as Middle East peace envoy – only Israel will miss him

Blundering Blair quits as Middle East peace envoy – only Israel will miss him

For Arabs – and for Britons who lost their loved ones in his shambolic war in Iraq – his appointment was an insult, says Robert Fisk
Fifa corruption arrests: All hail the Feds for riding to football's rescue

Fifa corruption arrests

All hail the Feds for riding to football's rescue, says Ian Herbert
Isis in Syria: The Kurdish enclave still resisting the tyranny of President Assad and militant fighters

The Kurdish enclave still resisting the tyranny of Assad and Isis

In Syrian Kurdish cantons along the Turkish border, the progressive aims of the 2011 uprising are being enacted despite the war. Patrick Cockburn returns to Amuda
How I survived Cambodia's Killing Fields: Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape the US

How I survived Cambodia's Killing Fields

Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape to the US
Stephen Mangan interview: From posh buffoon to pregnant dad, the actor has quite a range

How Stephen Mangan got his range

Posh buffoon, hapless writer, pregnant dad - Mangan is certainly a versatile actor