The company would almost certainly have to tap shareholders for funds to make the purchase. Stakis shares have performed strongly this year, but at the current market price of 100.5p the group, which almost went to the wall in the late 1980s, only values the group at pounds 485m. One analyst said Stakis would probably have to make a one-for-two rights issue to raise the bulk of the funds to clinch the acquisition.
Stakis, headed by David Michels, yesterday declined to comment, as did Lonrho. However, leisure industry sources said Stakis was the clear front- runner to buy the Metropole hotels, which are considerably larger than the industry average in terms of the number of rooms.
The jewel in the Metropole portfolio is the 700-room hotel located on London's Edgware Road. This hotel was valued in the summer at pounds 147m. The valuation does not take account of pounds 80m of planned investment to make it the first 1,000-plus room hotel in the capital, which is basking in boom conditions last seen in the mid-Eighties.
Plans for the Edgware Road hotel also incorporate the building of a conference centre that would be the largest in inner London, and is aimed at boosting Metropole's core customer base - the business traveller.
It is understood that this increase in size could push Lonrho's asking price for the Metropole hotels to as much as pounds 350m. Two Metropole hotels are located in Brighton, and the other two are in Blackpool and Birmingham.
A leisure industry source said Stakis's ambitions to buy the Metropole chain were unlikely to involve the disposal of its provincial casino operations.The casinos have underperformed in the past couple of years, but there are signs that they are turning the corner and will turn into a useful cash cow for Stakis to use to develop its capital-intensive, and predominantly three-star, chain of hotels. There is also the as-of-yet unquantifiable benefit from Government plans to further deregulate gaming, such as granting casinos the freedom to advertise, something which they are banned from doing.
Disposal of the Metropole chain would still leave Lonrho with its unwanted 10-strong chain of Princess hotels, which are mainly sited in resorts in the US, the Caribbean, and Mexico. There is said to be no shortage of potential buyers in the US for the Princess business, including the Hilton Hotels Corporation, ITT Sheraton and Marriott.
A swift trade sale at top-dollar price of both the Metropole and Princess chains would heap more embarrassment on SBC Warburg, which tried to float Lonrho's hotels interests as a single company earlier this year. The flotation was cancelled with SBC Warburg unable to attract enough interest for a flotation value pitched at pounds 700m, and amid increasing interest from buyers for either the Metropole or Princess chains.
During the process, analysts were sceptical about the logic of having different hotel groups operating under one umbrella.