Unlikely lads have big ambitions for the hotel business

At first glance it is the most unlikely double act, potentially a marriage made in hell. But Mr Peter George and Mr David Michels became an item last week. Mr George's Ladbroke group, which owns every Hilton hotel outside the US, is taking over Stakis, the Glasgow-based hotel chain headed by Mr Michels.

The quiet bookie's son and the brash, chain-smoking gambler will be running the hotel business for which they have big ambitions. There will be casualties, including 200 office staff at Stakis and Ladbroke's former Hilton boss, Mr David Jarvis, who is walking away with a golden handshake worth £1.5 million sterling (€1.04 million).

But the acquisition by Ladbroke, which is likely to ditch its high street name to reflect a new sassier style, will trigger a shake-out in the sector. Among the big players few are more powerful than Ladbroke's Hilton, and all the Stakis hotels - including its two Irish operations, in Charlemont Place, Dublin, and Templepatrick, Co Antrim - will be rebranded under that name.

Mr Michels lives in a modest home in Stanmore, a North London suburb, socialising with neighbours of long standing and friends including the taxi drivers and other hoteliers who make up his Friday night poker school.

The son of a Jewish immigrant who fled Berlin as the second World War began and set up home in London, Mr Michels senior urged his son on to better things, and that meant starting in the book-keeping basement of a Grand Metropolitan hotel.

Mr Michels has hopped continents to further his career but arrived at the top of a FTSE 100listed group after working for only three companies: GrandMet, Ladbroke, Stakis and now Ladbroke again.

Mr George, Surrey born and bred, is quiet, thoughtful and self-effacing. The son and grandson of a bookie, he had ambitions to be an RAF pilot until he grew to 6ft 5ins, much too tall to fit into a cockpit. So in 1963, at 20, he joined Ladbrokes and has been there since. For a man steeped in the sport of kings he is strangely detached from it. He has no racehorses, but plays golf. When he does bet, his maximum is £200 - small beer to a man whose pay package in the last two years has topped £2 million sterling. Mr George learned his trade with Mr Cyril Stein, the controversial boss who ruled Ladbroke with a rod of iron for 27 years. When Mr Stein retired in 1994, Mr George was his successor.

By then he had lived through one of the most scandalous episodes in corporate history which in 1979 saw Ladbroke's casino licences withdrawn. The company was found guilty of "disgraceful conduct" by a court after allegations that it spent £500,000 luring high-rollers from rivals and of dealings with friendly policemen and "hostesses".

Mr George was running the racing division then, and says the first he knew of the affair was when he read about it in the satirical magazine, Private Eye. Some old Ladbroke hands questioned whether he had the credentials to take over from Mr Stein. Mr Ron Pollard, Mr Stein's right-hand man, described the new generation of Ladbroke chiefs, Mr George among them, as "more suited to cleaning Mr Stein's shoes than filling them".

Mr George has since transformed the reputation of the group. He won support in the City by cutting the company's bloated dividend and selling the ailing Texas DIY chain, and has convinced the gaming authorities to allow Ladbroke to begin operating casinos again. Buying Stakis will add another 22 regional casinos to the Ladbroke empire.

Like Mr Stein, however, Mr George appears to be cultivating an air of mystery. His spokesman will not even reveal Mr George's golf handicap on the grounds that his job might be at risk as a consequence. The breakdown of his first marriage was blamed in part on his work regime - and Mr George has admitted that Ladbroke is his first love. "If they opened me up, Ladbroke would be carved on my heart," he says. But the slightly stooped sandy haired 55-year-old has recently remarried.

Mild-mannered Mr George may be but he is not cowed by the might of government. When last September former British Trade Secretary, Mr Peter Mandelson - acting on advice from the Monopolies and Mergers Commission - threw out Ladbroke's acquisition of rival Coral, Mr George was very critical.

Ladbroke had been given an indication from the Office of Fair Trading that the Coral deal would be allowed, and Mr George was ready to sell hundreds of betting shops to ensure it got through. When the MMC ruled otherwise he accused them of "looking at the deal through the wrong end of the telescope". He even singled out MMC member, Ms Helena Shovelton, for comment, saying that she had been present for only one hour of his two days of evidence. Such revelations about the traditionally secret activities of the competition authorities was seen as verging on outrageous. Associates admit, however, that Mr George is still not the flamboyant act that typically fronts a hotel business. This is a clue as to why Mr George was so interested in Stakis. He was keen to expand the hotels chain but his enthusiasm was given added impetus by Coral - and the £400 million it generated when he sold it on to banker Morgan Grenfell.

The icing on the Stakis cake was the charismatic Mr Michels, whose foot-in-mouth asides have become legendary. When he was drafted in to rescue the business built up by Sir Reo Stakis but brought to its knees by his son, Mr Michels asked the company's 27 banks what gearing was (a standard term for a firm's debt levels).

Luckily Mr Michels is a quick learner and the banks were bright enough to recognise that he knew how to run a hotel; he did not talk about reducing gearing but knew how to get bodies into beds, and demanded they cough up another £1 million to improve accommodation throughout the Stakis estate.

Then, the company was worth barely £70 million. Last week, Ladbroke paid £1.2 billion to buy it, taking on £300 million debt and giving Mr Michels a £2 million windfall. But he says he despises the trappings of wealth. Indeed, he scrapped a more generous share-option scheme for directors at Stakis when the company attracted headlines in the boardroom pay row of the early 1990s.

Married with two grown-up children, Mr Michels refused to move to Glasgow when he took over at the deeply Scottish Stakis. Aides say he would have to spend two days a week in London anyhow. But his reticence may have been due to family roots and the call of Saturday tennis fixtures with hotel chums. Now he has the top hotels job in Ladbroke and could be breathing down Mr George's neck for the post of chief executive of the whole group. By that time, the clever Mr George may well be ensconced in the chairman's office, taking the credit for such a visionary acquisition and appointment.

His ambition is unlikely to rest with Stakis. Having reunited the Hilton worldwide brand with the US, Mr George has made no secret of his hopes to pull off a full-scale transatlantic merger. If he can find a way around them it is as good as a done deal.