Bermuda's Princess hotels, said yesterday it intended to take its booming hotels business public within two months as the first step of a planned three-way split.

A prospectus detailing the float of the Princess and Metropole chains as a separate company will be available early in September, while the actual initial stock offering is seen taking place a month later, Lonrho said.

Analysts forecast proceeds of a hefty 700 million ($1.08 billion), which Lonrho intends to use to pay off debts and strengthen its balance sheet.

With the hotels market particularly buoyant in London and occupancy rates rising in the United States, the timing of the float could hardly be better, analysts said.

"The timing is excellent. The UK market is in an upswing and Lonrho's American hotels will probably be driven by a strong US economy,'' said Alan Hopper at consultancy Pannel Kerr Forster Associates.

Said Stephen Barker, the regional vice president of Princess Hotels Bermuda: "Lonrho is a conglomerate with diverse interests in many parts of the world.

The flotation will create a new public company 100 percent focused on success in the hospitality industry. I think this is a positive change for the Princess organisation including the two Bermuda properties.'' The hotel chains will be based in London and listed on the stock exchange as Princess Metropole Hotels Plc.

Two months ago, Lonrho announced plans to spin off its hotels business as well as its general trading activities by the end of the year. It will retain its 1.2 billion ($1.8 billion) mining sector. The spinoff, drawn up by Chief Executive Dieter Bock who took over from founder Tiny Rowland last year, is intended to streamline Lonrho's operations, which consist of more than 500 firms spread out over Europe, America and Africa.

"The announcement of our intention to float Lonrho's Princess and Metropole operations is further evidence of our efforts to enhance shareholder value,'' Lonrho's chairman Sir John Leahy said in a statement.

Lonrho's Metropole chain has hotels in London, Birmingham and in the southeast coastal resort of Brighton.

To facilitate the break-up, Lonrho earlier agreed to buy the one-third holding in its Metropole chain from Libyan Arab Foreign Investment for $389 million.

Lonrho said earlier it did not expect to fall victim to a new US sanctions law, which punishes foreign firms investing in oil and gas projects in Iran and Libya. Lonrho said it was severing its links with Libya rather than investing there.

The ten Princess hotels are located in Bermuda, the United States, the Caribbean and Mexico. The chain also manages six hotels and four game lodges in Africa, but these will remain with Lonrho.

The Princess Metropole hotels turned in an operating profit of 42 million ($64.7 million) for the year ended September 30, 1995, a 71 percent increase from the previous year, on turnover of 254.6 million ($392.3 million).

The shares in Princess Metropole will be offered first to Lonrho's existing shareholders, but they will have to pay the same price as outside investors subscribing to the issue. -- Bloomberg