Granada and Compass in talks

By WILLIAM KAY
Updated:

 

Granada Group is in the final stages of agreeing a £6bn takeover of contract caterer Compass Group prior to the long-awaited split of Granada into separately-quoted hospitality and media companies.

Media will be primarily the North-West, Yorkshire, Tyne-Tees and London Weekend television franchises, as well as television and film production and TV and video recorder rental shops. The hospitality side will include Heritage, Post House and Le Meridien hotel chains as well as motorway service stations, Little Chef, a major Burger King franchise and leading contract catering names such as Sutcliffe and Ring & Brymer. It also owns the Grosvenor House hotel in Park Lane.

The demerger will infuriate Sir Rocco Forte, who always argued that Granada's 1996 takeover of the Forte group was turning it into a conglomerate. The planned split, due in the next year, implicitly acknowledges that.

No terms have been announced for the Compass takeover, but a statement said it would 'broadly reflect recent average market capitalisations of the two groups'. Chairman of the combined group until the demerger will be current Granada chairman Gerry Robinson. Following the demerger he will become a non-executive director of the media business and a consultant to the catering side, which will be chaired by Francis Mackay. Charles Allen, currently Granada chief executive, will chair the media company.

Robinson has said that before he retires at the age of 55 in 2003 he hopes to complete one major deal, enabling the demerger. Before that the media side may well be boosted by a takeover of either United News & Media or Carlton Communications, pending a Competition Commission inquiry due to report to Trade Secretary Stephen Byers next month.

Early indications are that some combination of the three companies will be permitted, and last week's assessment by the Independent Television Commission suggested that there would be fewer barriers to a Granada takeover of United, owner of the Anglia and Meridian franchises as well as Express Newspapers.

The Compass takeover will also have to be vetted by the competition authorities, but it will be fairly straightforward for Granada to sell catering assets to meet whatever objections may be raised. Granada shares rose 27p to 660p and Compass was up 21 1/2p at 924p.

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