Guinness Peat delivers ultimatum to De Vere

One of the biggest shareholders in De Vere Group is limbering up for a fresh onslaught on the hotels company unless its new chief executive unveils a major change of strategic direction alongside tomorrow's preliminary results.

The activist investor Guinness Peat warned yesterday it would press for the group to spin off its four and five-star De Vere hotels arm in an attempt to unlock shareholder value.

Issuing an ultimatum to Carl Leaver, who joined from Whitbread in September, Blake Nixon, Guinness Peat's UK executive director, said: "If they don't grasp the nettle we will have to be much more strident. The best thing would be the sale of the De Vere hotels business."

Options open to Guinness Peat, which has a 10 per cent stake, include sending an open letter to shareholders seeking support for its proposals, calling an extraordinary shareholder meeting or proposing special resolutions calling for corporate action at the group's annual meeting next February.

De Vere owns 21 upmarket hotels and also runs 14 mid-market Village sites focused on the leisure market and Greens, a 15-strong chain of standalone health and fitness clubs. The group has fared reasonably well during the recent downturn in the hotel industry, thanks to its provincial focus and decision to woo leisure travellers seeking minibreaks.

The company has spent more than £200m onDe Vere hotels over the past four years, buying sites such as the Cavendish in St James's, yet, according to Mr Nixon, has earned a return of just 6 per cent on its investment.

"As soon as they are spending money, they are destroying value," he said. "It needs a big change of strategic direction."

Other moves Mr Leaver could make to pacify Guinness Peat include selling the De Vere freeholds and either taking on management contracts to run the hotels or leasing them back via a sale-and-leaseback agreement. The money raised could be spent on the rollout of Village Leisure, a concept familiar to Mr Leaver, who oversaw Whitbread's expansion of Travel Inn from 5,000 to 17,000 rooms. It could also be handed back to shareholders or used to pay down debt.

Commenting on recent rumours that De Vere is among the parties interested in acquiring Selsdon Park, the Croydon-based hotel and golf course operated by Le Meridien, Mr Nixon said: "That would raise the heckles of quite a few of their shareholders."