Granada may wager BSkyB stake

JOHN SHEPHERD

and MATHEW HORSMAN

Investors are becoming increasingly convinced that Granada will use much of its pounds 700m shareholding in BSkyB, the satellite television company, to deliver a knock-out blow to win control of the Forte hotels and restaurants company.

Speculation also grew yesterday that, to see off Granada, Sir Rocco Forte would be prepared to split his role as chairman and chief executive, and even distance himself from the day-to-day running of the group by becoming non-executive chairman.

Sources said that some of Forte's main institutional shareholders, which include Mercury Asset Management with 13.23 per cent and Robert Fleming, the 10th-biggest with 1.78 per cent, were prepared to back Forte if Sir Rocco took those steps.

Meanwhile, dealing rooms in leading City stock broking firms were awash yesterday with gossip that Granada was looking to place with institutional investors the 111 million BSkyB shares it owns directly.

Some dealers said there were separate rumours that Granada may even be prepared to distribute the BSkyB shares to Forte's shareholders. BSkyB shares closed 2p higher at 420p, just 1p below the all-time high.

There are 975 million Forte shares in issue. An exchange of one BSkyB share for every nine of Forte's would add 46p a share to the value of the bid terms.

A Granada insider said: "Certainly it was one of the options we have considered. But it would be unattractive to lose the advantages of the stake, and we don't really want to dismember it."

One leading analyst, who preferred not to be named, said: "I would have thought he would be crazy to consider it [a sale]. Gerry is chairman of BSkyB and the sale would make him look bad. Investors would lose confidence and he would have to resign as chairman of BSkyB if he sold the shares."

However, City sources said that several of Granada's institutional shareholders were becoming reluctant to underwrite a higher offer and would prefer the company to drop its bid and trump Whitbread's pounds 1.05bn pitch for Forte's roadside restaurants - the Happy Eater, Little Chef and Welcome Break chains.

Granada is separately facing increasing pressure from the powerful Council of Forte, which owns less than 1 per cent of Forte's shares but controls 50 per cent of the votes. The council, according to sources, has thrown a time-bomb into the battle by taking an active role in the bid and is demanding that Granada offer at least pounds 300m for its shares.

Asked to clarify whether the Council had demanded a hefty premium for its shares, a Granada spokesman said: "At least it shows they are willing to talk to us."

He dismissed suggestions the council could be holding out for as much as pounds 300m. "That is just a negotiating position."

City sources said stock market rumours circulating yesterday that Granada would today increase its bid were wide of the mark, adding that the company would not move until Monday at the earliest. Any higher offer has to be made before Wednesday.

Forte again lashed out yesterday at Granada's contention that it could enhance Forte's profitability by pounds 100m annually if its bid succeeds.

The company's advisers challenged suggestions, revealed yesterday in the Independent, that significant savings could be achieved by reductions in head-office charges and through combining the Forte and Granada roadside restaurants businesses and hotels.

"Why doesn't Granada understand that the buying synergies between restaurants and hotels are minor compared with the profit potential of good yield management?"

It emerged last night that Granada's pounds 100m target is based on a lower profit than the pounds 190m full-year forecast announced by Forte last week.