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Millionaire bids $8.8 bn for Six
LONDON, England (Reuters) -- Millionaire Hugh Osmond launched an audacious 5.6 billion-pound ($8.84 billion) bid for Six Continents, the world's top global hotelier, on Monday promising investors better returns if they trust him with their company. The restaurant and pub entrepreneur is offering shares in his shell firm, Capital Management and Investment Plc, for the much larger Six Continents, owner of Inter-Continental hotels and All Bar One bars, with a cash-and-shares alternative. Osmond attacked Six Continents management over the last decade, describing them as poor operators, poor dealmakers and poor financiers as he looks to convince long-suffering shareholders he can create more value from the group. Six Continents rejected the bid. Analysts and investors said the offer's success rested on trusting Osmond's reputation and track record over that of the current management. His companies, including PizzaExpress and Punch Taverns, have seen their shares slide after he left. "Our advice to clients is just sit back and enjoy the ride," said Hilary Cook, director of investment strategy at Barclays Private Clients. "We've got one bid on the table and we don't think that will be an end of it." "A Hugh Osmond share is only worth as much as the assets he owns and the plans he has," she said, adding that there was a chance Six Continents will start to mimic Osmond's strategy. Osmond sets off this week to persuade shareholders that his bid to split up the group and sell off chunks will deliver better value for them than relying on the company's own demerger plan, which is set for a key shareholder vote on March 12. If the bid succeeds, his private equity group Sun Capital, which owns 20 percent of CMI, could earn 340 million pounds, bringing Osmond around 100 million pounds for his work. "I am sure this will be a long fight but an interesting one," said Osmond, who made his name in the 1990s as the driving force behind PizzaExpress restaurants and with a bold 2.75 billion pounds swoop on Allied Domecq's pubs in 1999. Six Continents said CMI's proposals gave shareholders nothing they do not already own except significant risk. The bid offers shareholders at most 98 percent of their own company and richly rewards CMI's directors. "CMI's offer will enrich its directors at the expense of our shareholders' long term interest. The vague proposals set out today carry considerable risk which will be borne by our shareholders," said Chief Executive Tim Clarke. OSMOND'S OFFEROsmond is offering 36 new shares in his CMI company for every one Six Continents share in his all-paper bid, valuing the Holiday Inn and Crowne Plaza group at 648 pence a share or around 5.6 billion pounds based on Friday's closing prices. The cash-and-shares alternative is worth slightly less and comprises 157p of cash and 27 CMI shares for each Six Continents share. The cash component is worth around 1.4 billion pounds. Despite the bid, Six Continents shares were the second largest faller in the UK benchmark FTSE 100 index, ending off 3.1 percent at 600 pence on disappointment that the cash element was not larger, and the view that this was a preliminary skirmish in a long bid battle. CMI shares closed unchanged at 18p. Moments after announcing his bid, Britain's Takeover Panel said Osmond had agreed to sell his 2.6 million Six Continents shares as, under takeover rules, Osmond cannot table a bid worth less than the price he paid in the market for his stake. Osmond and his advisers CSFB and Lehman Brothers have devised a complex structure of incentives which only kick in if he can raise the equivalent Six Continent share price to 692p, 38 percent above the price when the company announced its demerger. If the equivalent share price rises to 850p then deal fees, value return fees, bonuses and incentives will reward Sun Capital, where Osmond is the senior of five partners, with 343 million pounds. "It's not going to be easy (for Osmond to succeed) because I think there's huge scepticism about the equity content of the bid," said fund manager Gareth Lewis at Singer & Friedlander. "I think he'll need to come up with more cash." Osmond's bid threatens to scupper Six Continents' plan to demerge its global hotels business and its All Bar One and O'Neill's British pubs into two separately listed groups. Under the plan, Six Continents planned to return 700 million pounds to shareholders, less than the cash component of Osmond's bid. Osmond, who is raising debt via banks HBOS, CSFB and Lehman, says the demerger is a waste of money and has made his bid conditional on Six Continents delaying the March 12 shareholder meeting to approve the demerger, or a vote against it. Six Continents has refused so far to adjourn the shareholder meeting over the demerger plan, which needs 75 percent approval, arguing that it offers the best way forward. Osmond hit back, saying that only the demerger process has pushed management to provide information on the business. "Not many buyers will make a high bid with no information," he said. Osmond plans to sell trophy hotels such as Inter-Continental and Crowne Plaza, conduct sale-and-leaseback operations, cut overheads and bring in top operators to improve performance. He accused Six Continents of being a poor operator of hotels and pubs, a poor dealmaker that sold off Gala bingo clubs and Coral betting shops too cheaply, and a poor financier that only maintained dividends using disposal cash or by pushing up debt. "It is clear that Six Continents has persistently destroyed value over a prolonged period," Osmond said. "Almost six billion pounds of net investment has left operating profits lower than 10 years ago." Copyright 2003 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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