Continents set to be hit for six

Hugh Osmond will put up £5.7bn and lock horns with Sir Ian Prosser to capture the hotel and wine bars group, writes Clayton Hirst

Hugh Osmond, the pub entrepreneur, will this week end days of posturing and table a formal £5.7bn offer for Six Continents, the company that owns the Holiday Inn and All Bar One chains.

The offer, expected on Thursday or Friday, will be made through Mr Osmond's AIM-listed company, Capital Management & Investment (CMI). It will take the form of a mixture of cash and shares and is expected to be around the 650p-a-share mark. Six Continents' shares closed at 625p on Friday.

Six Continents' chairman, Sir Ian Prosser, will almost certainly reject the offer, having spent much of last week rubbishing Mr Osmond's informal approach. This presents the possibility of a hostile and bloody battle for Six Continents. It could also open the door to other bidders entering the fray.

Mr Osmond believes that by breaking up Six Continents and selling off its property assets, considerable value can be released for shareholders – and himself.

However, Sir Ian is intent on pressing ahead with proposals to demerge Six Continents' hotel and pubs operations. Under this plan, Six Continents shareholders would be given new shares in the two spun-off companies and would also share £700m in cash. The plan will be put to a shareholder vote on 12 March. As a result, Mr Osmond is expected to go into overdrive in the next two-and-a-half weeks in an attempt to persuade shareholders to reject Sir Ian's proposals.

Neither Mr Osmond nor his advisers were prepared to comment. But it is understood that he has already held talks with a number of companies interested in buying some of Six Continents' assets. The list is thought to include Hilton, Marriott, Starwood and the private US hotel investor, Strategic Hotel Capital.

Mr Osmond, the former chairman of Punch Taverns, has hired the investment banks Credit Suisse First Boston and Lehman Brothers as his financial advisers. Well-placed sources said that both banks are also prepared to help Mr Osmond bankroll the bid for Six Continents. However, mystery surrounds the role of Goldman Sachs. The US investment bank last week disclosed under Takeover Panel rules that it had traded in Six Continents' shares. The rules state that companies involved in possible bids should disclose purchases. However, the bank is not officially involved with Six Continents or with Mr Osmond's bidding team. There is speculation in the City that should Mr Osmond's bid progress, Goldman Sachs could be interested in helping to fund the offer.

Six Continents last week criticised Mr Osmond for "using the increasingly common tactic of attempting to introduce uncertainty without having to take responsibility for making a properly formulated and financed offer to shareholders". Despite this, Six Continents' shareholders yesterday received a letter from Sir Ian rubbishing Mr Osmond's plans. It states: "CMI has no experience in the hotel sector or in the management of global brands. The board believes that such an approach is fundamentally flawed and will not maximise value for you."