The main planks of Forte's defence are now in the public arena. The only thing that remains is a full-blown property revaluation, which we are promised with the final defence circular on 2 January. Here, Sir Rocco Forte has to watch his step, for too high a valuation could well backfire by demonstrating the lamentably small return he has been making on those assets.
So far, Forte seems to have had the better of the war, despite its track record and state of unpreparedness at the start. The sale to Whitbread of the restaurants for pounds 1.05bn falls short of a master-stroke, for it has the smell of a forced sale at a poor price, but it may be enough to make Forte's shareholders hold out for a lot more than the present Granada offer.
The question they have to ask themselves is this. After sale of the restaurants, what are they left with? The immediate pay-back is a special dividend of up to 50p a share. Chastened by the experience of the Granada assault, the rump hotels group presumably also becomes a much better-run company with real value flowing through to shareholders. Presumably is the operative word here, for quite a bit of faith is required to believe this.
The sale to Whitbread is undoubtedly on the cheap side, though it is more than could have been achieved through the previously planned demerger. An exit p/e of 17 compares poorly with the 23 times earnings that Pelican trades on and the 26 that Pizza Express sells at. Furthermore, Forte has shut the door on an auction by making this a lock-out deal, a device which from the seller's point of view is always hard to justify. This in itself might give Forte's shareholders pause for thought; has anything really changed at this company?
In a bid that is becoming famous for its one-liners, Gerry Robinson's, "There has been more innovation at Forte during the course of this bid than in the past 10 years," is particularly poignant.
To hand over all that value to Granada, admitedly with an on-going stake in its future since part of the offer is in shares, may look equally unappealing, however. Granada is that most unfashionable of companies, a conglomerate. Doubts about its strategy have considerably damaged Granada's share price since the bid was launched. If Forte shareholders extract too high a price from Granada, there will be nothing left for Mr Robinson and the deal becomes pointless.
Granada could probably withdraw gracefully - which is what leaving the present offer on the table would amount to - without serious damage to its reputation or that of its chief executive. The bid costs so far, pounds 35m, are a lot to throw down the drain but they are nothing against the likely costs of overpaying. Mr Robinson will wait to see the final defence before making up his mind, but he must already be aware that it's a tough call.
Gates closing on the empire-builders
It looks as though 1996 is set to be another boom year for takeovers with little sign of the present hectic pace of activity abating. Financial services, pharmaceuticals, brewing and the media should continue to generate a steady flow of mergers and acquisitions.
In part, the motor for the present wave of activity is the prospect of a Labour government. Many chief executives see next year as a last chance for getting the big, empire-building acquisition through the competition authorities - particularly if it involves rationalisation and job losses, as most of them do these days.
As it stands, Labour policy on mergers would be to refer to the Monopolies and Mergers Commission virtually any acquisition of size. The onus would then be on the bidder not merely to show that the merger is not against the public interest (the present burden of proof) but to demonstrate that positive benefits would flow from it, too.
It seems doubtful that such a policy would survive the transition from opposition into government. For a start, it would put policy in Britain at odds with that of Europe, where the need is to show only that a merger above a certain size does not harm competition. Demonstrating future benefit would also be a highly subjective thing, making merger decisions the object of whim and favour.
Nonetheless, a much tougher stance on takeovers and mergers seems highly likely. It may well be that the present Government pre-empts Labour by altering its stance ahead of the election. There are, after all, few votes in allowing through big job-shedding mergers without any kind of independent investigation.
Already there are straws in the wind. The two generator bids for electricity distribution companies would almost certainly have escaped without reference under Michael Heseltine.
The "anything goes" policy in operation when he was President of the Board of Trade in any case looks to have been a flawed one. What little academic research has been done on these matters indicates that very few mergers yield much long-term benefit, either to shareholders in the bidding company or more generally.
Nor is the creation of yet larger and larger "national champions", some of them with near-monopolies of their domestic markets, necessarily something that should be encouraged. In an increasingly global, cost-conscious and competitive economy, the big-is-beautiful corporate philosophy has enjoyed a new lease of life.
Yet the fact remains that it never seems to have done Britain any good. A higher proportion of GDP is already accounted for in Britain by large companies than almost any other developed economy. It is in the small to medium-sized sectors that Britain is weakest. This is where more successful economies such as Germany and Japan have outclassed us. Britain has its fair share of "world-class" companies, but in the second and third tiers down, the companies that aspire to world class, Britain's showing is poor. This may have something to do with the takeover culture that rules here.
In Britain the entrepreneurial dream is to make your pile as rapidly as possible, sell up and retire to the country with the Labradors. Not so in Germany where companies are much more commonly kept in the family and passed from one generation to the next.
For the time being the takeover culture, deliberately encouraged by Government policy and the City, remains supreme. But things are changing, not just among policy-makers, but among long-term institutional shareholders, too.
Many of them are a good deal more sceptical about the supposed benefits of mergers than they were. Those who want to take advantage of the present liberal environment had better move fast; the gates are closing.