Savoy's sparkle set to raise asking price
Wednesday 25 March 1998
The figures smashed analysts' forecasts and could raise the asking price of the group, which owns The Connaught, Claridge's and The Berkeley, to more than pounds 550m.
The Savoy's resurgence also ensures that Ramon Pajares, managing director, and his management team, will be kept on by any new owners if the group is sold.
American hotel groups and financial buyers are circling.
Blackstone, the US bank, has already tabled an indicative bid of pounds 520m. However analysts believe that the Savoy's strong results should attract buyers from around the world keen to get hold of some of the most prized properties in the industry. The interest could push the price much higher.
No formal offer has yet been put to shareholders and none of the potential suitors have started due diligence. The group is unlikely to select a final buyer for some time. A sale is being held up by a wrangle between the Wontner family and Granada, the group's largest shareholders, over the division of the spoils. Bickering within the Wontner family may also scupper a deal. Doubts about a sale going ahead sent Savoy's shares down 87.5p to 1800p yesterday.
Mr Pajares said he was confident he could continue to improve the performance of the hotels whoever ended up controlling them and was happy to work for any owner.
He is keen to take the Savoy name abroad. "We have no plans to do that at the moment but speaking on a personal level the brand name is excellent and it would be a very good chance to ... look at opportunities overseas," he said.
Savoy's operating profits jumped 54 per cent to pounds 24.2m, reflecting the fruits of a pounds 72m refurbishment program at its flagship hotels over the last few years.
Higher occupancy and room rates helped operating margins improve to 23.8 from 17.7 per cent. Operating profits at The Berkeley grew 61 per cent thanks to the opening of an exclusive health club on the site in conjunction with Christian Dior. A strong marketing drive in the US and Europe to attract new visitors meant the group was able to shrug off the potentially damaging effect of the strong pound and the economic turmoil in the Far East. The group plans to spend another pounds 9m sprucing up the hotels this year.
Over the last three years its pre-tax profits have grown 460 per cent and dividends have trebled.
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