Knapp’s Trafalgar Holdings Had Offered $900 Million : Grand Met Rejects Bid for Its Hotel Operations

Grand Metropolitan PLC, based in London, on Monday rejected a nearly $900-million offer by Trafalgar Holdings for its Inter-Continental hotel chain and other hotel operations.

Grand Met, with far-flung operations in health care, brewing and tobacco as well as hotels, said it considered the hotel operations a core part of its business and is not interested in selling. The British concern received Trafalgar’s bid on June 6.

Donald Reynolds, a Trafalgar executive vice president, declined to comment on Grand Met’s rejection of Trafalgar’s offer for its 96-hotel Inter-Continental chain, its Forum hotel chain and other operations. Trafalgar would not respond, Reynolds said, until it had seen Grand Met’s rejection letter.

Reynolds would not say what attracted Trafalgar, a Los Angeles investment firm controlled by financier Charles W. Knapp, to the hotels. “We think it’s a valuable asset that we’d like to have,” he said. “But that’s kind of obvious.”

Grand Met’s hotel operations, which include the Sir Francis Drake Hotel in San Francisco and the Inter-Continental Hotel, formerly the Barclay, in New York, earned the equivalent of $57.5 million on revenue of $573.7 million in the year ended Sept. 30, 1985. Grand Met purchased the Inter-Continental chain from Pan Am in 1981 for $500 million. Grand Met does not actually own all of the hotels but operates many of them under management contracts, analysts said.

Dan Lee, a lodging industry analyst with Drexel Burnham Lambert in Boston, said that based on Grand Met’s hotel revenue, the price offered by Trafalgar “seemed high.” But, he said, the price almost certainly reflects the value of hotels and real estate owned by Grand Met. “The value of the three or four hotels could easily reach $900 million,” he said.

Trafalgar, which was formed by Knapp after he was ousted as chief executive of Irvine-based Financial Corp. of America two years ago, has not had much luck with several recent acquisition attempts.

In April, Trafalgar and its British partner abandoned their eight-month effort to acquire Minebea, a Japanese maker of miniature ball bearings and electronic devices.

The partnership had offered to buy Minebea for $1.43 billion in what would have been the first hostile takeover of a Japanese company by a foreign firm.

Minebea foiled the takeover by merging with a Japanese textile maker.

In May, Trafalgar dropped a $242.4-million bid for Southern Union Co., a Dallas natural gas utility, after an investigation of the company determined that Trafalgar’s “criteria for acquisition could not be met.”

In January, Trafalger lost a bid for a 27% stake in Orion Pictures. And recently, Trafalgar was outbid for MGM Studios in Culver City. However, Trafalgar did succeed in purchasing a controlling interest in Murray Industries, the maker of Chris Craft pleasure boats, for $50 million to $100 million.