Granada has 'firepower' to raise bid

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The Independent Online
Granada has got "plenty of firepower" in the event that it needs to raise its pounds 3.3bn cash-and-shares bid for Forte.

The assertion, made by a Granada insider, came as the company's bankers confirmed that a pounds 2.5bn syndicated loan to help finance the acquisition had been over-subscribed.

All told, 16 banks accepted sub-underwriting terms covering pounds 200m from the three lead bankers, ABN-Amro, BZW Syndications and Chemical Bank, proving, they said, that "the banking community has indicated a heavy measure of support for Granada and its offer for Forte."

Any raised offer for Forte would probably require additional cash. The Granada source said yesterday that it was not the time to discuss making a higher bid. But Granada's fiscal conservatism, its strongly cash-generative businesses and its 13 per cent stake in the cable and satellite broadcaster BSkyB combined to give it "plenty of scope if a higher bid proves necessary".

Meanwhile, Granada got an additional boost from the City in the form of a reasonably positive report from Merrill Lynch, the merchant bank. It stressed that Granada had the management ability to tackle Forte's range of restaurants and budget hotels, even if there were questions about its understanding of the four-star and five-star businesses.

Merrill Lynch, which called on both sides to provide more detailed information about their plans, was harder on Forte, suggesting that Sir Rocco Forte, its chairman and chief executive, should split the two roles. In addition, it said the current management "was slow to take action on the ground" and that it had chosen the wrong defence strategy when it announced broad demerger plans earlier this month.

Separately, the Takeover Panel ruled for a second time yesterday that Granada's controversial plans to enhance Forte profits by pounds 100m a year if its bid is successful were "fairly presented" to analysts and the public.

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