British Brewer Plans to Buy Hotel Chain

British conglomerate Bass said Friday that it agreed to buy the Inter-Continental Hotels & Resorts chain from Japan’s Saison Group for $2.9 billion in cash and assumed debt.

Britain’s second-largest brewer, which is already in the hotel business and operates restaurants and pubs, will pay $1.4 billion in cash for Inter-Continental. It will also assume $1.044 billion of the hotel chain’s debt and pay off $450 million of its debt.

The purchase will increase Bass’ presence in the luxury end of the hotel market where demand for rooms is rising and operators can charge higher rates. Bass, which operates 2,400 hotels under the Holiday Inn and Crowne Plaza brands, also expands its hotel business outside Britain with the purchase.

Inter-Continental’s hotel business consists of 187 hotels with 65,000 rooms in 69 countries, including the U.S. The Inter-Continental chain includes 117 hotels. The company also has a mid-scale hotel chain, Forum, with 20 hotels. The other 50 are independent hotels that have joint marketing agreements with Inter-Continental. Inter-Continental owns or has long leases on 22 of the 187 hotels.

Saison, a closely held hotel and department store operator, put Inter-Continental on sale earlier this month in a bid to reduce a heavy debt burden it accumulated during a rapid expansion in the late 1980s.

The Japanese company bought Inter-Continental in 1988 for $2.2 billion. It has sold other assets, including its holding in a Japanese convenience store chain earlier this month.

Britain’s Ladbroke Group, which manages Hilton International hotels outside the U.S., pulled out of the bidding for Inter-Continental because the shareholder approval it needs would delay the sale, Ladbroke spokesman Steven Devany said.

The sale ends a tussle between several companies over ownership of the luxury chain. Dallas-based Patriot American Hospitality Inc., Starwood Hotels & Resorts Trust and Washington, D.C.-based Marriott International Inc. were linked to Inter-Continental, although none of them confirmed making a bid.