Lehman buying Le Meridien hotels

U.S. investment bank Lehman Brothers is set to take over troubled British hotel group Le Meridien this week in a 700 million pound ($1.24 billion) deal, a source close to the situation said Monday.

Lehman is working with U.S. Starwood Hotels & Resorts Worldwide Inc. to exercise an option to match an offer of almost 700 million pounds for Le Meridien made two weeks ago by rival U.S. investment bank Goldman Sachs Group Inc.

Lehman is expected to announce a deal within the next few days, the source said, adding that Starwood will operate the hotels if a deal is agreed.

Privately owned Le Meridien, which owns the prestigious Grosvenor House and Waldorf hotels in central London, has been trying to restructure after breaching agreements with creditors.

Le Meridien fell into trouble earlier this year after being hit hard by a slowing economy and slumping tourism.

The company’s senior banks, including Merrill Lynch, Canada’s CIBC and up to 12 other banks, are owed about 750 million pounds and have threatened to throw Le Meridien into administration if it does not find new financing.

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After months of negotiations, Le Meridien said in July it had struck a deal to hand over control of its international operations to Lehman, but that deal fell through in November after the various parties failed to reach agreement.

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“We are continuing to work towards what we hope will be a positive resolution to the situation,” a Lehman spokesman said, but he declined to comment further on the situation.

The deal did not include 11 hotels, including the Grosvenor and Waldorf and other flagship properties, that are owned by the Royal Bank of Scotland.