Sir Rocco burns the midnight oil preparing Forte's defence

JOHN SHEPHERD

Sir Rocco Forte spent last night locked in meetings with his legions of financial advisers burning the midnight oil, preparing the Forte hotel company's crucial day-39 defence document.

Its release today will set the clock ticking on the most important week in the company's fight for survival against the hostile pounds 3.3bn takeover bid from Granada, which only has one week left in which to decide whether to increase its bid terms.

There is intense speculation that Forte's final release of fresh financial information today will be built around retaining shareholder loyalty. This may involve paying a one-off 50p dividend from half of the pounds 1.05bn proceeds from the proposed sale of its Happy Eater and Little Chef roadside restaurants to Whitbread. The money may also be used for a share buy-back - or a combination of the two.

The document, a Forte spokesman confirmed, will detail how Forte intends to use the proceeds from the Whitbread deal as well as the pounds 200m reaped from other recent disposals, which include the US Travelodge hotel chain and Lillywhites.

Forte yesterday signalled it intends to come out fighting hard, by firing off a seven-point missive, questioning Granada's logic in launching a highly-leveraged takeover bid.

The missive said: "Granada's grossly inadequate bid repeats the mistakes of the highly-leveraged 1980s conglomerates."

And it asked: "Doesn't pounds 3.6bn of pro forma debt and 207 per cent of pro forma gearing increase the business risk to unacceptable levels?"

Charles Allen, chief operating officer and soon to be chief executive of Granada, dismissed the attack. Forte had said this all before and was making the same mistake again of trying to compare the company with diversified industrial groups.

"Granada is very firmly in the leisure sector, so are Forte. We know exactly what we are going to do here," he said, promising that more detailed plans would be released in the next couple of weeks showing Granada's strategy for sweating more from Forte's assets.

He also further questioned the value of the deal with Whitbread for Forte shareholders. "It does not enhance shareholder value in any way. We believe the Whitbread deal is the biggest own-goal they have had."

As for the question of the company's soaring ratio of debt to shareholders' funds should it win the bid, a Granada spokesman said Forte had failed to state the real figure, which was much lower.

He added that Granada's 10 per cent holding in BSkyB, the satellite television company, was in the books at pounds 65m, significantly below the market value of pounds 700m. Granada also intends to bring debts down by selling parts of the Forte empire, principally the pounds 200m investment in the Savoy hotels group and the Welcome Break motorway service stations.

Forte is believed to be lining up more disposals of non-core assets. These include the 68 per cent limited voting stake in the Savoy group.

Further details may be released today of how Forte intends to distribute the Savoy shares among investors. Calculating the worth of the shares for investors is difficult because of the two-tier voting structure, which is heavily tilted in favour of the Wontner family trusts which own a large part of the key Savoy 'B' shares.

It is understood that some Savoy directors privately favour enfranchising the limited voting 'A' shares, and may be prepared to table a formal proposal at a board meeting in the next few months. Another non-core asset owned by Forte is a 25 per cent stake in Alpha Airports, the in-flight catering and airport retailing group floated two years ago next month.