Osmond confirms Six Continents bid interest

Several shareholders in Six Continents yesterday expressed their support for a possible takeover bid from Hugh Osmond, the pubs and restaurants entrepreneur, who yesterday confirmed his interest in the leisure group formerly known as Bass.

One major investor said: "I think shareholders are delighted and would be happy to see any serious offer put on the table.... Six Continents is probably one of the most poorly run FTSE 100 companies."

A bid from Mr Osmond would disrupt Six Continents' plans to press ahead with breaking itself up. The hotels-to-pubs group, which spans some of the biggest names in the leisure industry, intends to spin off its pubs arm in April.

Jim Stride, at Axa Investment Managers, which has a 3 per cent stake, said: "It is a very interesting development. To organise a bid pre-demerger will require an awful lot of financing to be in place."

The news that a potential bidder had emerged ahead of an extraordinary shareholders meeting scheduled for 12 March to approve the demerger sent Six Continents shares up sharply. They rallied 6 per cent, closing 35.5p higher at 590p.

Mr Osmond would use Capital Management and Investment, an AIM-listed cash shell he runs with his associate Alan McIntosh, as a vehicle for a bid. His interest emerged after CMI revealed that it had begun building a stake in Six Continents.

CMI, formerly e-xentric, yesterday confirmed its interest in Six Continents. It said it was "currently considering making a takeover offer", but declined to comment on what level a bid might be tabled at. The company, which was set up at the height of the technology boom to invest in internet stocks, added: "No assurance can be given that any offer will be made." It said a further announcement would be made in "due course".

In a separate statement, Six Continents said its board had noted the announcement made by CMI but said it had "not received an approach". It added: "As has always been the case, the board will review and consider on its merits any proposal that offers a combination of compelling value and certainty of delivery."

CMI also announced a shake-up to its board. Mr Osmond, previously a non-executive director, has stepped up to the post of executive chairman while Mr McIntosh, previously non-executive chairman, has been made finance director, in what City sources said marked the company's final preparations for making a formal approach.

The City was divided on what level a bid was likely to be pitched at, with analysts' estimates ranging from 650p to 850p a share. At the higher end, Six Continents would be valued at £7.4bn. There were no further details about how Mr Osmond planned to finance the bid, although he is understood to have held talks with several private equity groups including Kohlberg Kravis Roberts and Texas Pacific, both from the US. Cinven is also thought to be interested. Mr Osmond is being advised by Credit Suisse First Boston, the investment bank.

Some shareholders signalled that they might be prepared to accept a lower offer for Six Continents than they might for another company – simply to overhaul its management. "Six Continents is unusual in that it has a very, very low level of shareholder support; therefore shareholders will be more flexible as to what they might consider," one top 10 investor said. "Some will be just desperate – like with an ill dog – to put it down."

Axa's Mr Stride said: "We would look to achieve a good price.... In the current environment a large element of cash will probably be a requirement for a large number of shareholders." CMI is expected to structure any deal to include a large amount of its paper.

While investors have backed the demerger, which will see the group return £700m to shareholders, many were disappointed at its decision not to bring in fresh talent at the top. "The potential is there [for value creation] but there is no evidence that the current management can achieve that. The key thing is that Richard North [the current finance director], who is responsible for a large chunk of the problems, has been promoted to chief executive," one shareholder said.

The demerger is costing Six Continents more than £200m. The company is spending £109m on advisers' fees, setting up new banking facilities and settling its tax bill, while the cost of restructuring its debt was £122m.

Should CMI succeed in its bid, Mr Osmond, who used to run Punch Taverns, is expected to sell off the hotel assets and retain the 2,200 pubs estate.