£1bn sale doubles InterContinental payout

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The Independent Online

Intercontinental Hotels announced plans yesterday to return a further £1bn to shareholders after sealing the sale its Holiday Inn portfolio in the UK.

Intercontinental Hotels announced plans yesterday to return a further £1bn to shareholders after sealing the sale its Holiday Inn portfolio in the UK.

The additional windfall will double the amount the company has returned to investors since it was spun out of Six Continents, the former Bass brewer, two years ago.

The group is selling 73 UK hotels, which have a net asset value of £1.02bn, to a consortium of investors led by Lehman Brothers, the US investment bank. The deal brings to 121 the number of hotels InterContinental has sold as it switches its focus to developing and franchising its brands rather than owning a massive property estate.

The City has welcomed the change of tack, which followed heavy investor criticism of the previous Six Continents management team for not sweating the company's assets. Shares in InterContinental soared 11.5p to 676.5p yesterday.

David Webster, the chairman, said: "The agreed sale of our UK portfolio and the promise of a return of a further £1bn to shareholders demonstrates that we are firmly on track with our strategy."

The confirmation of the sale came as the group reported a 27 per cent jump in pre-tax profits for the year to 31 December to £309m, on the back of a pickup in the global travel market. The group, which manages the Holiday Inn, InterContinental and Crowne Plaza brands, singled out the US and UK markets as particularly strong. It has sold most of its US portfolio, retaining the management rights on the hotels involved.

Simon Larkin, at ABN Amro, said: "We are delighted. These are good numbers and a return of capital of £1bn is all we had hoped for from the company."

InterContinental said it would manage 63 of the UK sites it sold for at least the next 20 years. It will manage the other 10 in the short term, until the sites are sold on again by their new owners, who include the Singapore government's property investment arm and Canada's Realstar Asset Management. The hotels' new owners will pay InterContinental management fees of £12m next year plus further bonus payments related to performance.

InterContinental plans to hand back the proceeds - worth about 140p a share - to shareholders in June, once the deal is completed. Although it has yet to set out the mechanism for doling out the windfall, analysts predicted the company would opt for a special dividend followed by a share consolidation.

The hotelier is still seeking buyers for 16 sites - the InterContinental Paris - which have a book value of £360m. It signalled its intention yesterday to sell the bulk of the remaining 59 properties it will own, although reiterated its desire to hang on to hotels in so-called "gateway" cities such as London, Paris and New York.

Jamie Rollo, an analyst at Morgan Stanley, estimated the company could yet return another £800m to shareholders, including its share of the proceeds from the forthcoming flotation of Britvic, the soft drink group.

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