Permira may trump rival's £745m De Vere bid

Permira, the private equity company, has again raised the prospect of a bidding war for the hotel group De Vere after advising investors not to accept an increased £745m offer from Richard Balfour-Lynn's Alternative Hotel Group.

Mr Balfour-Lynn is the chief executive of Marylebone Warwick Balfour, the group that owns the boutique hotel chains Malmaison and Hotel du Vin.

He raised his agreed bid to 850p in cash for each share in the 18-strong luxury hotel group yesterday.

Permira has yet to formally bid for De Vere but had been linked with an 840p-a-share offer. At that level, Permira's offer would have trumped Mr Balfour-Lynn's previous 825p bid.

Shares in De Vere jumped 20p to 866p, valuing the group at £759m as investors bet on a takeover battle.

In a statement responding to Mr Balfour-Lynn's latest move, the private equity company said: "Permira is considering whether to make an offer for De Vere and therefore it continues to urge shareholders to take no action at this time."

Permira had been expected to make a counter offer for De Vere over the next week but the increased offer from AHG, Mr Balfour-Lynn's acquisition vehicle, may force it to act sooner than it had planned.

A Permira spokesman declined to comment on the timescale for any move. Permira has teamed up with Royal Bank of Scotland and James Ritblat's property firm Delancey to make the bid.

The private equity firm has lined up Tony Troy as the chief executive of De Vere. Mr Troy runs the six-strong Principal Hotels business that Permira recently bought from Royal Bank of Scotland.

AHG has gained the backing of De Vere's board and irrevocable undertakings to accept the offer from shareholders representing a little over 20 per cent of the company. De Vere has agreed to pay £7.45m to AHG if it accepts another offer or if the bid lapses.

At 850p a share, AHG's bid is worth about £1bn as it will assume De Vere's debt and pension liabilities.