Forte selling Kentucky Fried Chicken stake: Group aims to extend European roadside catering

FORTE, owner of Little Chef, Harvester Restaurants and the Grosvenor House hotel in Park Lane, London, has given the market some indication of its global ambtions after announcing that it is to sell its 50 per cent stake in the British arm of Kentucky Fried Chicken for about pounds 40m.

The group has said it is keen to develop its European roadside catering operations.

It bought the Relais chain in France this year for pounds 70m and is setting about smartening it up and introducing the ethos that has brought success with Little Chef.

Forte now sees opportunities in Germany, where the roadside catering market is being deregulated, and in Spain, where it has a joint venture with the oil company Repsol to develop service stations.

Bruce Jones, leisure anaylst at Smith New Court, said 80 per cent of Forte's catering profits came from roadside operations and the group was particularly good in this area.

The buyer of the KFC stake is Forte's partner, and the owner of KFC worldwide, the drinks group Pepsico. The sale price represents eight times the figure Forte paid to take its holding in 1985, when KFC was losing pounds 500,000 a year.

Last year the operation, which has 84 company-owned restaurants and 220 franchised outlets, made pounds 6m. However, Richard Power, communications director of Forte, said that a fierce price war in the fast food area had hit KFC's profitability this year.

The sale is part of a disposal programme that will see the group floating its airport services arm, recently renamed Alpha, for about pounds 220m, and selling Harvester.

Rocco Forte, the group's chairman and chief executive, told analysts on a trip to France at the end of last week that he had turned down an offer of pounds 110m for Harvester. The bidder was not diclosed but it is assumed to have been Whitbread.

Mr Jones said he thought Forte was right to turn down the offcer. Harvester could be worth more than pounds 125m.

Charles Mason, leisure analyst at Barclays de Zoete Wedd, agreed, saying that by announcing that pounds 110m was not good enough Forte had set down a base price for an auction of Harvester. 'There is clearly some pressure on Whitbread to conclude a deal, especially after Chef & Brewer was sold to Scottish & Newcatle Breweries,' he said.

Sentiment has been improving about Forte's debt position. The group has pounds 1.3bn of borrowings, which many City analysts believed was worryingly high.

Though the KFC sale does little to dent the total, the feeling is that Forte can live with this amount of debt, though it will restrict its ability to take up some opportunities.