Hughie Dewey and Louie

3 March 2003 By Hugo Dixon Follow @hugodixon

Osmond has two weaknesses: the cash he is offering comes from SixCon’s own coffers; and he will cream off a large chunk of the upside. But SixCon’s management has a big drawback of its own: it is still there.

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Hugh Osmond's Capital Management and Investment has made a hostile offer for Six Continents.

CMI is offering 36 of its own shares for each SixCon share. It is also offering a partial cash alternative – of 157p in cash plus 27 CMI shares. CMI shares were valued at about 18p each on Monday. Assuming full takeup of this alternative, SixCon shareholders would receive £1.4bn in cash.

The offer is conditional on SixCon abandoning or delaying its demerger plan by at least 65 days – or SixCon shareholders voting the plan down.

After the offer, SixCon shareholders would own 98% of CMI.

CMI has devised a complicated incentive structure for Osmond and his senior management. This has five elements, several of them involving Sun Capital – another Osmond vehicle.

 Sun will receive 1% of any value returned to SixCon shareholders in excess of £700m –subject to SixCon's adjusted value exceeding 692p a share after three years.

 If the value returned is over £2.6bn, Sun will receive 20% of the upside above 692p. It will also get 244m new CMI shares. Finally, it will receive the equivalent of 2% of value returned above £700m rather than 1%.

 Sun will receive an advisory fee of £22m payable in CMI shares if the SixCon deal is completed.

 CMI shareholders will receive a scrip dividend of 235m new CMI shares if the deal is completed.

 Certain individuals including members of the CMI board will exercise warrants giving them 28m new CMI shares.

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