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Bass shares fall over pounds 1.7bn bid for luxury hotels.

Shares in Midland brewing giant Bass have crashed by more than five per cent after fears that it faces financial disaster over an expected pounds 1.7bn move for the Inter-Continental Hotel chain.

Bass has been sitting on an estimated cash pile of nearly pounds 3 billion since its attempt to take over rival drinks group Carlsberg Tetley was blocked by Government trade and industry secretary Mrs Margaret Beckett.

The brewing and leisure group raised more than pounds 1.2 billion from the sale of three businesses in the last six months, leaving gearing below ten per cent, even after a promised return of pounds 850 million to shareholders.

It has since paid around pounds 50 million for four hotels in Australia, under a strategy to develop a strong presence in the Asia-Pacific region for the groups' Holiday Hospitality subsidiary, which already includes Holiday Inns.

The Inter-Continental hotel group, known for its international portfolio of top class hotels aimed at business travellers, was bought by Seibu Saison of Japan in 1988 for pounds 1.3 billion. The recent financial crisis in Asia has prompted its present owner to put the chain up for sale.

But hopes that the debt-ridden group would accept a cheap price for its hotels evaporated in the face of strong bidding from US competitor Marriot International and investment trust Patriot American Hospitality.

Bass is believed to have handed in its bid for the chain earlier this week, and looks to have paid a high price.

As it is part of the larger group, there are few figures released in public on Inter-Continental's performance making valuations of any possible purchase by Bass difficult.

Inter-Continental's 212 hotels are thought to generate earnings before interest, depreciation and tax of just pounds 110million.

Bass refused to comment on the speculation, but insiders suggest an announcement confirming the deal was due to go out after the New York and London stock markets had closed yesterday.

Its shares closed down 22p at 963p after hitting a low of 935p in the afternoon.

Analysts said that if Bass were to buy the chain it would make strategic sense but there were concerns over the amount which might be paid.

"Strategically, it's a very good idea. Bass could very quickly grow the business and deliver strong returns," said one analyst who asked not to be named.

"It would give them critical mass in areas where they'd like to be."

A Bass spokesman said a purchase of this size could probably be met from the group's reserves.

But sources in the loan market said that Bass had mandated banks to arrange a syndicated loan facility of more than over pounds 1.2 billion to finance the mooted bid.

n At an extraordinary general meeting held yesterday, Enterprise Inns shareholders approved the acquisition of Gibbs Mew.

Enterprise Inns said that it had received valid acceptances to the offer in respect of 8,392,986 Gibbs Mew ordinary shares, representing 60.3 per cent of Gibbs Mew's issued ordinary share capital.

Acceptances in relation to the preference share offer had also been received in respect of 25,440 Gibbs Mew preference shares, representing 80.8 per cent of Gibbs Mew's issued preference share capital.
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Publication:The Birmingham Post (England)
Date:Feb 21, 1998
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