French hotel group to sell pounds 260m stake in Compass

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The Independent Online
Compass shares fell 3.7 per cent to 713.75p yesterday after Accor, the French hotel group, said it would sell half of its 21.5 per cent stake in the catering company to cut debts.

Accor, the world's fourth biggest hotel operator, said it intended to place an 11.5 per cent stake in Compass with institutions through a global bookbuilding operation, co-ordinated by Dresdner Kleinwort Benson.

At yesterday's prices the 11.5 per cent stake was worth about pounds 260m. Accor shares rose 3.1 per cent to Fr799 (pounds 86m) after reaching a record high of Fr810 at one stage during the day.

Accor said that it was going ahead with the sale with the full knowledge and permission of Compass's management. The bookbuilding started yesterday afternoon and is expected to be completed by tomorrow.

Compass said it was not concerned about the drop in the price of its shares.

"We're all confident there will be strong demand for our shares," said Roger Matthews, Compass's managing director.

Francis Mackay, vice president and director-general of Compass, said in Accor's statement: "The reduction of the Accor stake, in looking to large international institutional investors, allows us to widen the Compass shareholding and favours the company's liquidity."

Accor said it agreed not to cut its remaining Compass stake to under 10 per cent for 12 months. The upward limit on Accor's stake, if it were to buy in the market at a given time, was put at 11 per cent.

In a previous agreement, Accor could not sell more than 5 per cent of its holding in Compass over a 12-month period.

Accor gained the shares when Compass bought a one-third holding in Eurest France from Accor in September 1995, for which it received cash and about 70.7 million Compass shares.

Under the terms of the acquisition, Accor agreed to restrictions on the acquisition or disposal of Compass shares except with Compass's agreement.

The sale represents about 36.5 million Compass shares out of the 68.3 million shares Accor holds. The move is considered positive for the French hotel company because it has little management say in Compass, said analysts. The extra funds will also allow Accor to reduce debt and help it concentrate on core businesses.

"It's tremendous news for Accor," said Nigel Reed, an analyst at Paribas Capital Markets. "It means the company will focus more on improving the accommodation, travel arrangements and car-hire businesses."

Accor has been criticised for its debt load, slow growth in operating profits and underperforming units such as Europcar, the car rental company it owns with Volkswagen. The company's stock, however, has been buoyed by an upbeat outlook for the French hotel industry.

Accor is expected to reduce debt to Fr14bn this year from Fr17bn last year, analysts estimated. That comes after the company last month reported an 8.2 per cent rise in 1996 fourth-quarter sales to Fr7.17bn.

Accor, which has said it is trying to cut debt, focus on its core business and grow through acquisitions, yesterday said it formed a venture with NH Hoteles of Spain to open between 60 and 72 two-star hotels in Spain in the next seven years.