Outlook: Greenalls fever strikes - yet again

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The Independent Online
CAN IT really be time to dust down one of the stock market's most bewhiskered takeover candidates? Step forward Greenalls, the pubs and hotels group that has been linked with so many potential predators over the years that one almost loses count. Bid talk on this company goes back to the 1960s at the very least.

This time the potential suitor is supposed to be Whitbread with a pounds 1.2bn bid at 400p per share. And the market has got itself in such a fervour of bid expectancy at the moment that Greenalls shares, not known for their sprightly behaviour, frothed up almost 11 per cent higher yesterday to 376.5p.

As ever, Greenalls is certainly a potential target. Its shares have underperformed the market by 50 per cent over the last five years. And Greenalls has done much of its own dirty work by getting out of brewing and, more recently, flogging its tenanted pub estate to Nomura for pounds 370m. What is left is a much more attractive core of managed pubs, a fledgling health club business and, most importantly the De Vere hotels chain.

It is De Vere that is the key. Ladbroke's pounds 1.2bn takeover of Stakis last week has underlined the value in the hotel sector, and the pub market is in the process of a major consolidation. De Vere would certainly fit Whitbread's strategy. It wants to beef up its leisure operations and De Vere would combine nicely with Whitbread's Marriott chain while Greenalls' fledgling Greens health club operation would dovetail with Whitbread's David Lloyd centres.

But then Whitbread has also run the slide rule over Vaux and its highly- valued Swallow hotels chain. If Vaux sells its brewing and tenanted pubs operation as planned it too would look more attractive to bidders.

Of course, all this may just be the wishlist of frustrated institutional shareholders who are waiting for their dismal investments to pay off. In Greenalls' case they are Schroders and the new value fund set up by Hermes which played such a prominent part in the removal of David Montgomery at Mirror Group. Hermes says it is not in the business of provoking bids and prefers to work with the management. But with the track record of the Greenalls board, that patience may not last long.