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