Granada 'to sell Posthouse hotels'

Granada is pledging to divest itself of its Posthouse and London hotels in an effort to calm investor concern over its £18bn merger with Compass.

Granada is pledging to divest itself of its Posthouse and London hotels in an effort to calm investor concern over its £18bn merger with Compass.

The scale of City hostility towards the deal has unsettled top executives and a charm offensive is planned to convince leading institutional shareholders of the merits of the deal.

One major concern is that the addition of Granada's hotels would dilute the high growth nature of Compass's catering business. In order to meet these fears, an eventual sale of Posthouse and the London hotels is planned but not until margins are improved to those enjoyed by competitors. In the case of Posthouse, this might take two years.

Granada is also planning to keep its Meridien and Travelodge hotels which it believes have potential for international expansion. Meanwhile, it is now thought certain that Granada will target United News & Media for takeover rather than Carlton once given the necessary regulatory clearances.

Carlton and United News have announced their own merger, which is currently being scrutinised by the Competition Commission.