Six Continents shares expected to surge as Osmond tables bid

Shares in Six Continents are expected to surge on the stock market this morning as it became clear that the entrepreneur Hugh Osmond is preparing a formal offer worth around £5.7bn or 650p a share, and that Hilton Group has hired investment banks to advise on whether it should join the fray.

A source close to Mr Osmond indicated that he was keen to hold talks with the pubs and hotels group, after a week of increasingly acrimonious comments from both parties about one another.

These developments make it increasingly likely that Six Continents will have to adjourn its extraordinary general meeting on 12 March for shareholders to vote on the proposed demerger of the former Bass hotels and pubs operations into two separate companies. Two American private-equity groups, KKR and Blackstone Group, which owns the Savoy, Claridges and the Berkeley hotels in London, are understood to be watching the situation closely. Neither would comment yesterday.

The American groups Starwood, owner of the Sheraton and Westin brands, and Strategic Hotel Capital have meanwhile expressed interest in buying parts of Six Continents's hotel estate. It owns the Inter-Continental and Holiday Inn chains, while the pubs side has the All Bar One, O'Neill's and Harvester chains.

Mr Osmond is understood to be intending to offer shares in his AIM-listed cash shell, Capital Management and Investment, in return for Six Continents shares, with perhaps a small amount of cash. CMI has a current market value of £43m, while Six Continents is worth £5.4bn.

An adviser to Mr Osmond last night dismissed as "an irrelevant red herring" the idea that he might reward himself and his team with "exploding options" in CMI, which would still be entitled to 12.5 per cent of the shares in the company even after it has been spectacularly enlarged by taking over Six Continents, netting £240m. There were signs that Mr Osmond was backtracking on the option plan for fear of accusations of being too greedy.

But the source added: "No one is suggesting Hugh is a charity. If he gets Six Continents he will be releasing big chunks of value to shareholders over time, and taking a chunk of the uplift in value for himself and his team as he does so." Analysts have suggested that Mr Osmond could return as much as £1.5bn to Six Continents shareholders.

A spokesman for Hilton, which owns the bookmakers Ladbrokes and Hilton hotels outside the US, said: "We are not pretending that we are not running a slide rule over what Six Continents might be worth. That is a no-brainer. Discussions are going on internally with our advisers, Deutsche [Bank] and UBS Warburg, and we have to decide what might or might not happen. But nothing is imminent."

Six Continents shares closed at 625p on Friday, up 70p on the week, as its chairman, Sir Ian Prosser, told shareholders: "CMI has suggested that any offer it might make would be based upon a break-up of the hotel business and sale of it to, or [in] partnership with, hotel operators. CMI has no experience in the hotel sector or in the management of global brands. The board believes that such an approach is fundamentally flawed and will not maximise value for you."

Mr Osmond has accused the Six Continents management of delivering "unacceptably low returns".

In an attempt to patch up these differences the Osmond camp pointed out that discussions between the two sides had taken place last October, adding that "their shareholders would be surprised if the board did not now try to speak to Hugh".