Granada meeting fuels talk of rise in bid price
Monday 08 January 1996
Senior managers of Granada were locked in meetings yesterday ahead of this week's crucial final stages of the hostile pounds 3.3bn bid for Forte.
The weekend session fuelled speculation in the Forte camp that Granada was planning to raise its offer - which it must do by tomorrow at the latest under Takeover Panel rules.
But Henry Staunton, Granada's finance director, speaking from a conference room at the company's London headquarters, said a final decision had not yet been made. "We still have a lot to go over, and it makes sense to do so without all the phones ringing."
A Granada spokesman also warned against reading too much into the Sunday meeting. Gerry Robinson, chief executive, who was in touch by telephone but not at work yesterday, "will have to make a decision in the next 24 hours", the spokesman said. "But remember, he is a very hard-nosed manager, and he knows what Forte is worth. If he is asked to pay more, or if the market seems to be demanding more than a realistic amount, he'll walk away."
City expectations of a raised bid centre on a range of between 360p and 380p a share, compared with the 327p value attached to Granada's initial cash-and-shares offer at market close on Friday. Forte shares last traded at 345p.
Meanwhile, the two camps continued to trade criticisms yesterday over the question of Forte's true value. Leisure analysts at Kleinwort Benson last week suggested that Forte's radical defence plan, which includes an pounds 800m share buy-back, the distribution of the company's shares in the Savoy group of hotels and the sale of its restaurant businesses to Whitbread for pounds 1.05bn, was worth 368p per Forte share.
However, Mr Staunton yesterday disputed the calculation, saying that, on Kleinwort's own assumptions and on the details contained in Forte's final defence document, the figure was 344.5p a share.
He also questioned Kleinwort Benson's contention that the share buy-back could be earnings-enhancing in the year ending January 1998.
Granada's decision is likely to be finely balanced. A raised bid of less than 360p a share is unlikely to secure shareholder support, analysts said. Only an offer close to 380p would be considered a knock-out bid.
But an offer as high as that would be difficult to justify to their own shareholders, Granada insiders conceded.
If it raises the stakes, Granada is expected to publish a detailed analysis of Forte's restaurant and hotel businesses, showing how it could achieved a promised pounds 100m in enhanced profitability. The plan is based on achieving costs savings through centralised purchasing and reduced overheads, and on introducing a new pricing regime at Forte's Little Chef and Happy Eater roadside restaurants. It also plans to increase room rates at Forte's budget Travelodge and mid-market Posthouse hotels.
A meeting with analysts is likely to be scheduled to discuss the profit plan, but only if a higher offer is unveiled.
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