Nikko Principal Investments has unveiled plans to grow the UK hotel chain Menzies following its £120m deal to acquire the business this week.

Going against the current trend, the Japanese investment firm plans to own and operate the 14 four-star hotels in the chain.

Senior management will retain shares in the company, with chairman and founder Nick Menzies holding a 17% stake and continuing to head the company. Menzies said there was "no particular target" to grow the chain, but he would continue to build a mixed portfolio of resort, country house and city-centre hotels.

"One of our biggest strengths is our diversity," he said. "There are some interesting opportunities out there in the fragmented, four-star market."

The deal, which marks Nikko's first foray into UK hotels, will enable existing private equity backers BancBoston Capital and Indigo Capital, which invested in the chain following a failed flotation in 1998, to exit the company.

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