Bonanza for Six Continents directors

Pubs demerger: Leisure giant's split will cost shareholders £109m in fees to financial advisers

The leisure giant Six Continents unveiled details of its pubs demerger yesterday, including multimillion-pound bonanzas for its army of City advisers and lucrative deals for its top executive directors.

The group, which announced plans to split into two last autumn, said trading in the new companies would start in April. The total cost to shareholders was revealed at £109m – more than 2 per cent of the company's market valuation.

Although shareholder pressure forced Six Continents to tone down its favoured share option scheme for executives at its hotels arm, formal listing particulars published yesterday showed that plenty of board members stood to gain financially from the separation.

Among these is Richard Hartman who was appointed managing director of Europe, Middle East and Africa in January. On top of his annual basic salary of $600,000 (£376,000), Mr Hartman, who currently lives in Singapore, can look forward to a further £138,000 in help with his accommodation expenses as well as relocation and repatriation assistance and annual home leave.

For each of the 57-year-old American's two children, he will also receive up to £40,000 a year to cover school fees. His children, who are expected to join their father in the UK, are believed to be five and 10 years old.

Tom Oliver, the outgoing hotels chairman, is in line for a discretionary performance bonus of up to £650,000 when he steps down at the end of next month. He will receive this in addition to his annual salary of £542,000. Mr Oliver, who will stay on as a consultant at the hotels group until March 2005, will bank an extra £500,000 if there is a change of control before the agreement starts on 1 April.

Meanwhile, Richard North, the current finance director, will see his annual basic salary soar by 20 per cent to £600,000 once he steps up to the chief executive slot at the new hotels group. Once Sir Ian Prosser, the group executive chairman, reaches retirement age in July and becomes non-executive chairman, his salary will fall to a basic £400,000. However, he will be entitled to a maximum bonus of 100 per cent of his salary if the group hits certain financial targets.

Tim Clarke, the current group chief executive, will see his salary fall to £500,000 from £575,000 under the terms of his new arrangement as head of the pubs arm.

On top of all this, there is a complex share options scheme that could net each director a sizeable, if unquantifiable, sum should either of the two arms fall to a takeover bid, which analysts have predicted is quite likely.

After the split, the Six Continents name will largely disappear from the City, with the hotels side set to trade under the banner of its best-known brand, InterContinental Hotels Group (IHG). The 2,000-strong pubs arm has been re-christened Mitchells & Butlers (MAB) to capitalise on the group's heritage: the former brewer was once better known as Bass, Mitchells & Butlers.

The group said that provisional advisers would receive the bulk of the £109m that the demerger is costing. A total of £51m will be paid to its lawyers, bankers, brokers, accountants and spin doctors, while taxes and "other costs" arising from the separation will be £30m. The new banking facilities for the companies, which are splitting the costs down the middle, will cost a further £28m.

Six Continents said IHG would seek to cut annual costs by at least $50m by the end of 2004, while MAB will reduce annual expenses by £10m, including about 90 redundancies. Mr North said job losses at IHG would be "not inconsequential".

Six Continents' shareholders will receive 50 IHG shares and 50 MAB shares for every 59 original shares they hold. An extraordinary meeting to approve the deal will be held on 12 March.

Six Continents, which emerged out of the break-up of Bass, has been under pressure to split its businesses after years of underperformance. It is returning £700m to shareholders.

But the group has drawn criticism for not overhauling its executive teams. Analysts have questioned how long the new management will remain in charge of the new groups, sayingventure capitalists and trade buyers are rumoured to be circling both businesses.