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Grand Metropolitan PLC has a shot at receiving more than $2.5 billion for its Inter-Continental Hotels Corp. subsidiary despite the lagging performance of the international luxury hotel chain, market analysts say.
Analysts also speculate that another chain will be the likely buyer of Montvale, N.J.-based Inter-Continental, which owns or runs 100 hotels in 47 countries. Marriott Corp., of Bethesda, Md.; London-based Trust House Forte PLC, and Hong Kong-based Mandarin Oriental Hotel Group are all said to be interested in Inter-Continental's real estate holdings, its management contracts and its internationally known name.
But, unfortunately for Inter-Continental's 200 employees in Montvale, a buyer would probably not be interested in the chain's corporate staff.
London-based Grant Met, which announced last week it was considering selling Inter-Continental after being approached by three potential buyers, is expecting to realize a bonanza. The company paid $500 million for the chain from Pan Am Corp. in 1981, and now Grand Met officials and others believe Inter-Continental is worth at least five times that much.
That's a hefty price tag for a mediocre performer like Inter-Continental. Although earnings have been increasing steadily in recent years, the chain's return on capital has remained disappointing, analysts say.
Inter-Continental's earnings before taxes and debt service jumped 25% to $64 million in the fiscal year that ended on Sept. 30, 1987. Revenues for the year were $553 million. Analysts say those numbers aren't very impressive for a company that has real estate holdings and management contracts worth more than $2 billion.
"When you...