Thistle joins growing list of hoteliers coming to the market

The hotel sector's rush to the stock market was joined by another heavyweight group yesterday as Thistle Hotels, London's biggest hotelier, confirmed its plans to float next month in an international placing and intermediaries offer.

The offer, which is expected to value the former Mount Charlotte Group at between pounds 1bn and pounds 1.5bn, is being pitched particularly at small private investors who will be offered discounts on hotel rooms as a perk.

The return of Thistle, owner of the five-star White's hotel, Cannizaro House in Wimbledon and 98 other, mainly four-star, hotels, will coincide with the planned flotation of Lonrho's hotels arm, Princess Metropole. Both companies are expected to tap investors for between pounds 500m and pounds 700m, prompting some analysts to question whether the market might start to tire of so many demands from one sector.

So far this year four companies have come to the market - Millennium & Copthorne, Jarvis, Macdonald Hotels and Cliveden - and more floats are expected next year.

Robert Peel, Thistle's chief executive, said he believed there would be plenty of demand for shares in good quality hotel companies, especially one such as Thistle which focused exclusively on the UK, thanks to the pounds 3bn that was effectively taken out of the sector by Granada's takeover of Forte at the beginning of the year.

Thistle, and the other hotel floats, are counting on a continuation of the buoyant conditions in the UK market, especially in London, where record numbers of tourists are pushing occupancy levels higher and bidding up room rates.

Thistle, which announced an 88 per cent jump in underlying profits in the six months to July, said room sales in the capital had risen by 22 per cent during the period. Thanks to the relatively fixed cost base of the hotel business, that had given profits a massive boost - according to Mr Peel, for every pounds 1 of extra revenue profits in London rose by 73p.

Thistle actually reported a loss before tax of pounds 63.7m compared with 1995's first-half profits of pounds 34.8m due to an pounds 87.8m exceptional charge which formed part of a pounds 204.6m write down of the value of the company's pounds 1.7bn portfolio of 100 hotels.

The flotation of Thistle provides a partial exit route for the company's largest shareholder Brierley Investments, the New Zealand-based conglomerate that acquired the former Mount Charlotte in 1990. Representing more than half Brierley's assets it was always understood that it would attempt to reduce its stake when market conditions allowed.

Brierley plans to lower its stake from 70 per cent to under 50 per cent. The Singaporean government, which holds the remaining 30 per cent, is expected to reduce its holding by a similar proportion.

Although no indicative price will be announced until the prospectus is issued in the middle of September, initial soundings suggest pounds 250m of new money will be raised of which pounds 150m will repay a convertible loan and pounds 100m be used to expand Thistle's current 13,600 rooms by about 2,000.

Comment, page 17

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