Granada sells off textile rentals business for pounds 136m

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The Independent Online
Granada yesterday took to pounds 350m the amount it has raised from disposals since its pounds 3.9bn purchase of Forte earlier this year, announcing the sale of its textile rentals business, Spring Grove, to the Davis Services Group for pounds 136.5m.

Taking together the sale of Forte's White Hart hotels, Granada's bowling centres, Budget Travel in Ireland and a 16 per cent interest in Independent Television News, Granada is about a sixth of the way toward selling off up to pounds 2bn worth of assets, in a bid to reduce the high debt it took on to buy Forte.

Charles Allen, chief executive, said the sale was part of "a summer tidying- up exercise," but declined to say what other non-core assets, other than the previously announced motorway and hotels operations, had been put on the block.

It is understood, however, that Granada's small theme park holdings, including Camelot, and some nightclubs have also been earmarked for disposal.

A significant further step in the sell-off is likely to be taken by December, with the sale of 17 Exclusive Hotels for more than pounds 1bn. Would- be buyers have now been invited into the deal rooms at Lazard Brothers to look at the financial information in detail.

Also to be sold, although not until early next year, are the Welcome Break motorway service operations inherited from Forte, under terms reached with the Office of Fair Trading.

The sale is likely to be delayed because Granada is unwilling to pay a portion of the gains on the sale to Whitbread, to which Forte had agreed to sell the chain as part of its scorched-earth defence late last year.

The "lock-out" provision between Forte and Whitbread, which included a promise to pay out a share of the gains if Welcome Break went to a third party, runs out 31 December. A sale could come earlier, however, if Whitbread agrees to buy the chain and rip up the lock-out agreement.

Spring Grove was acquired just three and a half years ago, as part of Granada's purchase of Sutcliffe Services from P&O. In the year to 30 September 1995 the company had pre-tax profits of pounds 11.6m and net assets of about pounds 53m.

Davis Services, the quoted textile rentals concern, specialises in laundry and linen rentals and was attracted by Spring Grove's greater strengths in workwear rentals. The sale includes Spring Grove's Sunlight Service and HSS Hire Shops, the tool and equipment rentals division.

"This is an excellent fit for our business," a spokesman said yesterday.

Davis will pay for the acquisition through a proposed one-for-three rights issue at 215p per stock unit, to raise about pounds 71.5m. By the end of the year, the company expects gearing to settle at about 65 per cent.

The City has approved of Granada's progress so far, although some analysts are beginning to suggest that the television arm could be a candidate for a separate listing in the future.

A Granada insider insisted last night: "It is our intention to continue to manage the assets we have.

"If circumstances change in the future, then of course it would be our fiduciary responsibility to consider the best interests of shareholders."

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