Shake-up planned at bid target Thistle

Hotel chain reviews property valuations and considers further disposals.

Takeover target Thistle Hotels is thought to be weighing up a range of buyout or disposal options and discussing a big writedown of its assets.

Sources said Thistle is considering taking up to £90m off the £1bn value of its hotels, though it may ultimately settle on a lower figure. It is consulting its advisers and is expected to raise the issue with its auditor, PricewaterhouseCoopers.

It is also understood that chief executive Ian Burke has been tentatively exploring the possibility of a management buyout of the hotel chain and has discussed the idea with Thistle's financial adviser, Merrill Lynch.

Sources have said Mr Burke is also in talks with various institutions over a sale and leaseback of some of Thistle's property, in an effort to increase the company's share price and raise money for potential acquisitions.

The moves emerged after Jersey-based company Orb Estates confirmed last week that it was considering making an offer at a "modest premium" to Thistle's current share price. On Friday the shares closed at 131.5p, valuing the company at £633m. Orb has not yet had formal talks with Thistle's board of directors.

The bid is most likely to occur through a deal with Singapore-quoted BIL International, which owns 46 per cent of the UK hotel chain. Orb, which bought 31 of Thistle's regional hotels and six London hotels in March, is understood to have approached Deutsche Asset Management to back a potential bid. Orb awarded Thistle a 30-year management contract for the hotels it acquired.

Sources have said Deutsche will do a deal if the bid is recommended by the Thistle board. That, however, is unlikely, given that Thistle served a writ on Orb last week in a dispute relating to the original disposal. Orb says it plans to counter claim, alleging it is owed £50m back from the £600m it spent on the hotels.

Thistle's asset valuations have come under scrutiny since rival hotel groups, such as Hanover International, admitted they were reviewing the valuation of their properties. Thistle is experiencing "uncertain" conditions and the hotels it owns suffered a fall in revenues of 13.6 per cent in the first half of the year. But it has £364m in cash from the disposals to Orb and therefore has flexibility in its options.

A company spokesman would not comment on the possibility of a management buyout or further disposals. But he added: "Thistle Hotels reviews the carrying value of assets at the end of each financial year – December. The process has not commenced yet, so it is much too early to say what the result will be."

Orb declined to comment. The company hit the spotlight when it made a bid for Izodia, a failed software company that turned into a cash shell, last month.