Hotel group returning cash to shareholders

Jarvis Hotels is returning £85m (€134.5m) to shareholders after signing a bumper sale and leaseback deal covering nine of its largest sites.

The group is reserving the majority of the £150m (€237.4m) raised through the sale to buy-up 36% of its shares at a set price of 137.5p each.

The deal is likely to mean a handsome profit for activist investor Jack Petchey who has built up a sizeable stake in the business this year.

Jarvis is selling off hotels in Gatwick, Guildford, Hatfield, Hemel Hempstead, and Farnham, Surrey, as well as two in Birmingham and two more in London.

They are being bought by a consortium backed by the Dublin-based Lioncourt Capital, which is leasing them back to Jarvis under a deal lasting nearly 35 years.

Jarvis runs 66 hotels across the UK, operating 57 under the Ramada brand, and has decided to focus on operating rather than owning hotels.

Executive chairman John Jarvis said today’s deal “continues our programme to reposition Jarvis Hotels as a hotel management services group”.

Shareholders will have to seek their cash through a tender offer, which needs to be approved at an extraordinary general meeting on November 4.

Jarvis said Mr Petchey’s Trefick vehicle, which has built up a 23.45% stake, had already agreed to sell down its interest in the company.

Shares in the High Wycombe-based group were up by more than 17% after details of the deal were released, a jump of 18p to 122p.

The group added that trading across the UK had improved with turnover now running ahead of last year’s levels for the first time.

Profits for the first half to October 12 were now only likely to show a more “modest” shortfall on 12 months ago than previously expected.

The economic downturn and the impact of September 11 on the tourist market caused a near 50% drop in annual profits reported earlier this year.

The remaining cash leftover from the sale and leaseback deal is being used to cut down debt, the group said.