Six Continents, the world's second largest hotel group, has promised it will return up to £1bn to shareholders if it is unable to agree a long-awaited hotels acquisition before the year is out.
The company claimed volatile stock market valuations in the wake of the terrorist attacks in the US last year has made for an impossible market to date in which to agree an acquisition.
Finance director Richard North said a period of stability on the equity markets was required before any takeover talks made headway. "Since September 11, buyers and sellers have not been sure what a 'right price' is," he said.
Six Continents' acquisitive ambitions have also been set back by criticism from some of its institutional shareholders. A letter from fund manager Hermes, which was circulated among institutional investors, was leaked this year describing its acquisitive track record as "value destroying," and urging the board to return surplus funds to shareholders.
Chairman Sir Ian Prosser declined to comment yesterday on the company's relationship with Hermes. Asked if future acquisitions would include further expansion of its 2,000-strong pubs chain, chief executive Tim Clarke said: "Our balance sheet resources are there for the international hotels business." This month, it emerged that Six Continents had held talks with Scottish & Newcastle about merging their pub chains before a float.
The deal would have produced a pub estate valued at £4.5bn, but talks are thought to have stalled in April. If the group wants its pubs division to take an active role in further sector consolidation, a similar demerger proposal is likely to be considered.
Mr Clarke said September 11 and the economic downturn had hit US corporate sector hotels as well as "gateway" hotels in long-haul destinations.
The group reported underlying pre-tax profits down 28% at £242m in the 28 weeks to April 13 - ahead of forecasts. Its shares closed up 2p at 730p.
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