Granada's last shot in battle of Little Chef

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The Independent Online
MATHEW HORSMAN

Granada, the television and leisure giant, was expected to raise its bid for Forte this morning in a last-ditch effort to win a hostile takeover battle.

There was also speculation it would pounce in early trading today, attempting to snap up a block of Forte shares to anchor its takeover bid.

At stake is ownership of Forte's chain of luxury, mid-market and budget hotels, as well as its 420 Little Chef and Happy Eater restaurants.

The consensus in the City was for an increased offer in cash and shares worth about 370p, and a fully funded cash offer of about 350p, valuing Forte at about pounds 3.6bn.

Granada was also expected to unveil additional details today of its plan to enhance Forte's profitability by pounds 100m a year.

But there were widely divergent views last night, as analysts and dealers tried to second guess Granada's chief executive, Gerry Robinson. Some analysts were calling for a "knock-out" bid of perhaps 380p a share. But Granada sources cautioned against too high a figure, pointing out that Granada's own shareholders, many of whom also own stock in Forte, would be uncomfortable if the company was seen to be overpaying merely to clinch the battle.

"Gerry is definitely between a rock and a hard place," said one analyst. "If he bids too high, it will look unjustifiable by his own analysis of Forte's prospects. But if he bids too low, he'll lose."

The finely balanced decision was believed by City analysts to be too close to call. A leading leisure analyst said: "There are four options: either he walks away, leaves the same bid on the table, increases it by a bit, or by a lot. Clearly, Granada has managed to keep its intentions very close to its chest."

The company had until today to sweeten its offer under Takeover Panel rules. Granada kept the City guessing over the weekend, insisting that a final decision had not yet been made.

But one City source said: "All the signs are there, and I feel sure Gerry is not going to walk away now."

Meanwhile, Forte hit back yesterday at criticism from Henry Staunton, Granada's finance director, who accused Forte of deliberately misleading shareholders in their final bid document. Just as Granada's directors sat down for an afternoon board meeting convened to discuss the bid strategy, Forte publicly threatened to issue a writ over Mr Staunton's remarks, published yesterday in the Times. When Granada refused to respond by 2pm, the deadline set by Forte's lawyers, the writ was duly issued.

The bid has been characterised by bitter and hostile exchanges, particularly between Sir Rocco Forte, the patrician chairman of the hotels group, and Mr Robinson, a self-made man of modest Irish origins.

Granada's initial offer, unveiled in November, was for four Granada shares and pounds 23.25 in cash for every 15 Forte shares, worth about 327p a share. That constituted a 18.9 per cent premium on Forte's share price on 21 November, the last day of trading before the bid was announced.

Forte's robust defence ever since has helped push its share price higher, and, by last night, it was trading at 344p, 17p ahead of the the value of Granada's bid.

Granada was believed to be guided in its higher bid by estimates that Forte's own defence strategy - including an pounds 800m share buy-back, the sale to Whitbread of the restaurant businesses for pounds 1.05bn, and a distribution of Forte's 68 per cent stake in the Savoy Group of luxury hotels - was worth as much as 368p per Forte share.

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